Economic Activity Across the Eurozone Contracts in August

Research firm Markit put out its final PMI data for August. Among the eurozone nations, the figures were worse than flash data given earlier. Both the preliminary and final data show a picture of a region in which most nations are in recession and large nations such as Germany and France are close.

Markit analysts write:

Eurozone economic output contracted for the seventh successive month in August. At 46.3, down slightly from 46.5 in July, the Markit Eurozone PMI Composite Output Index came in below its earlier flash estimate of 46.6. The average index reading so far in Q3 2012 (46.4), is in line with that registered for the second quarter as a whole.

The downturn in output was again steeper in the manufacturing sector. Although the rate of contraction in manufacturing production eased to a two-month low, it was still one of the steepest registered since the end of the previous recession in 2009. Service sector business activity fell for the seventh straight month, and at a slighty faster pace than in July.

August data signalled a widespread contraction of economic activity across almost all of the nations covered by the survey. The steepest rates of decline were still registered in Spain and Italy, while the modest downturns in Germany and France also continued. Brighter news was signalled for Ireland, with output rising for the third month in a row and at a slightly faster pace than during July.

And:

Rob Dobson, Senior Economist at Markit said: “The final August PMI came in only slightly below its earlier flash estimate, leaving the Eurozone economy on course to fall back into technical recession in the third quarter. Sharp declines in new orders at manufacturers and service providers, plus further job losses, mean that there is little prospect of a sustained improvement in economic conditions over the near-term.

“Some heart can be taken from the recent recovery in Ireland, which is providing hope to others that a return to growth is possible, and further evidence that the downturns in Italy and Spain may at least be easing. The looming concern is the increasing signs of weakness coming out of Germany, the nation others were looking to as a pillar to prop up growth in the broader currency region. With its export engine in reverse gear and domestic demand faltering this is looking less likely as the year progresses. If the core nations falter, the outlook for the periphery will surely worsen.”

Douglas A. McIntyre