Factory Slump Deals Euro-Area Economy Weak Second-Quarter Start
The euro-area economy slipped at the start of the second quarter, with weakness in manufacturing spilling over into services.
A Purchasing Managers’ Index, which measures private-sector activity in the 19-nation region, unexpectedly slid in April, defying economists’ expectations for a small improvement. The euro, already down after disappointing German factory numbers, extended its decline after the reading from the currency bloc.
The reports showed manufacturing in the euro area shrank for a third month, led by an ongoing slump in Germany. A measure of services declined to the lowest since January.
While there was a solid performance in Germany’s services sector and France showed signs of stabilizing, the overall picture is that the euro region economy is in its worst growth spell since 2014. The composite euro-area PMI suggests the economy is running at quarterly growth of just under 0.2 percent.
“The data add to worries that the economy has failed to rebound with any conviction from one-off factors that dampened activity late last year,” said Chris Williamson, an economist at IHS Markit. There’s “only very modest growth in the face of headwinds from slower global demand growth and subdued economic sentiment.”
The report will make for an uncomfortable reading at the European Central Bank, where policy makers are hoping for an economic rebound in the second half. More evidence of weakness could force them to deploy fresh measures to support flagging growth.
Worryingly, companies also began to show reluctance to hire new staff. Employment growth was among the lowest since 2016.
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