Consumer Confidence In Eurozone Falls

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The eurozone economy struggled to gain traction and create jobs in August, with business activity slumping to a two-month low and consumer confidence falling sharply, according to surveys released Thursday.Growth was uneven across eurozone countries, with Germany "robust" and France losing ground ?

The purchasing managers index (PMI) for the currency bloc’s manufacturing and service sectors declined to a lower-than-forecast reading of 52.8, from 53.8 in July, the London-based Markit research group said.

Analysts surveyed by dpa-AFX had expected the PMI to come in at 53.4 points in August.

Consumer confidence in the eurozone also fell in August, slumping for the third consecutive month to minus 10 points, from minus 8.4 in July, according to a survey by the European Commission.

“The data confirms that the underlying momentum of the economy is cooling,” said Unicredit economist Chiara Corsa.

Still, the PMI has remained above 50 – meaning industry is on an expansionary path – for 14 consecutive months.

The latest economic confidence surveys also came amid concerns that the trade war between the West and Russia could hit the currency bloc, with the uncertainty unleashed by the Ukraine crisis and other global tensions triggering a fall both in exports and investment.

The latest surveys were expected to add to pressure on the European Central Bank (ECB) to follow up on its recent round of monetary moves with new action to shore up growth in the eurozone and to ward off the threat of deflation.

“With geopolitical tensions increasingly posing a threat to the subdued and fragile upturn, it is clearly premature to assume that the ECB’s easing work is fully done,” said ING Bank economist Martin van Vliet.

German exports to Russia plunged by 15.5 per cent in the first half of 2014, compared with the same period last year, the Federal Statistics Office said on Wednesday, with exports of cars parts, machinery and food stuffs at the forefront of the fall.

Underlining the uncertain global economic picture, the release of the eurozone household survey and PMI coincided with the publication of the PMI for China’s manufacturing sector, which dropped to a three-month low in August, according to a survey by HSBC.

At the same time, US economic growth continued to build up steam, with a slew of indicators released Thursday pointing to the world’s biggest economy turning in a strong performance in recent months.

Releasing the PMI for the eurozone, Markit said that the fragile upturn in the 18-member currency bloc’s economy was still too weak to result in any meaningful fall in the region’s high unemployment rate.

“Even before rising geopolitical headwinds began to buffet the economy, the double-digit unemployment rate prevailing in the eurozone was already excessively high,” said Markit senior economist Rob Dobson.

“Signs are that the modest job creation of recent months has stalled in August,” he said.

The downbeat outlook for jobs is also likely to have undercut consumer confidence in the eurozone.

Dobson expects the eurozone economy to grow by a weak 0.3 to 0.4 per cent in the three months to the end of September, compared with the second quarter, when it posted zero growth.

Leading the fall in the August PMI was a sharp slowdown in the eurozone’s key manufacturing industry.

The PMI for the manufacturing sector hit a 14-month low, leaving it only just above the critical 50-point threshold. Output in the service sector also slumped, with the PMI for the sector declining to a two-month low.

But, with a reading of 53.5, the service sector PMI underlines the major contribution that domestic demand will make to growth in the eurozone this year, economists said.

Based on a survey of about 5,000 companies across the eurozone, the indicator also showed activity in France’s embattled economy starting to catch up with Germany, the eurozone’s economic engine.

In addition, there was encouraging news from nations at the centre of the euro debt crisis – the so-called periphery states – with economic activity outside Germany and France making headway, the PMI showed.

GNA
PDC

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