The latest data show that while European economies continued their expansion last month, the pace of recovery remains painfully slow, Reuters reports.
Markit released its numbers on the eurozone composite purchasing managers’ index, as well as figures for the activity of businesses in the services sector. The composite value for the eurozone came in at 51.9 in October, a slight drop from September’s 52.2 value but still above the 51.5 flash estimate from earlier last month. As values above 50 indicate expansion, rather than contraction, October’s numbers indicate the fourth straight month in which the region’s economic activity has risen.
The services sector posted similar results, dropping from 52.2 in September to 51.6 in October. Again, this beat the flash estimate, which was just under 51, so the numbers were actually somewhat of a positive surprise to economists. Despite average service charges sinking continually over two years, which can harm the pricing power of companies in the sector, the outlook for the area remains positive throughout much of the region.
The big winner in the data was Ireland, which posted a composite PMI of 58.8 in October. By far the highest value in the eurozone, it comes as good news to the country, which is hoping to become the first in the region to officially exit a bailout program. Spain and Italy posted modest gains, an achievement for countries that have spent much of the past two years at sub-50 levels in PMI indexes. Germany, the region’s largest economy, continued to post solid numbers, as well.
A piece of not-so-good news in the report was employment levels, which continued to drop throughout the region. The lack of employment and persistently high unemployment — rates in the eurozone currently stand at 12.2 percent — have been perpetual problems as the seeds of an economic recovery begin to germinate. Especially with countries like Spain and Greece still above 25 percent in their unemployment rates, the creation of jobs will be a necessary step if residents are to feel the effects of the recovery.
The lackluster gains could put further pressure on the European Central Bank to take action at its monthly meeting, which will be held later this week. Though many analysts do not expect bank to lower interest rates at this point in time, concerns over both the pace of the recovery and extraordinarily low inflation rates could incite a response from the ECB.
Chris Williamson, the chief economist at Markit, echoed that sentiment by saying that “the loss of momentum raises concerns that the upturn is faltering and piles further pressure on the European Central Bank to reinvigorate the recovery.” He added, “Having signaled a steep rate of contraction during the early months of 2013, the PMI has indicated growth in each of the past four months, and expansion is now being seen across the board,” showing at least some optimism in the face of myriad concerns.
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