European Manufacturers Excel in December
New economic data indicate that the eurozone’s recovery will finish the year on a high note, Reuters reports.
According to Markit’s compilation of the eurozone’s Purchasing Managers’ Index, flash data from the month of December suggest it will be a good end to a year that has been marked by ups and downs. The composite flash value for December is 52.1, up from last month’s 51.7. As any value above 50 indicates an expansion, this means that overall, economic activity will grow at a better pace in December.
One of the components of the composite value, the manufacturing sector PMI, will perform admirably this month, finishing with a score of 52.7. This is a significant increase from last month’s value of 51.6, beating out most analyst expectations, which predicted a modest increase in December.
However, the services sector is not expected to enjoy the same success as its manufacturing counterpart. The flash value for that area comes in at 51, slightly down from November’s 51.2. A decline in the services sector is troubling because it indicates that consumerism is not truly thriving in the region. It is one thing to say that European producers are back in business; it is another thing to say that European consumers are back to pre-crisis levels of spending. This is especially true when everyone is afraid that the consumers simply don’t have the wealth to drive an economic recovery in the eurozone until employment levels start to pick up.
December marked the 24th straight month during which private sector employment across the region has fallen, according to Markit’s calculation. While unemployment rates are in control in some parts of the area and seem to have stabilized in nations such as Spain and Greece, where they remain troublingly high, falling rates of employment still indicate that more and more people are finding themselves out of a job. When unemployment rises and employment falls, the effects of the two trends are only compounded, as was seen in the region during the financial crisis.
Regional trends inside the eurozone persisted this month, with the divide between Germany and France widening. Germany has seen rising employment and expansions in multiple sectors over the course of the past several months, while the French economy continues to stagnate. With French President Francois Hollande finding his back against the wall on his promise to deliver falling unemployment, the picture in the country has largely failed to improve.
Chris Williamson, the chief economist at Markit, had mixed feelings about the data, released Monday. “The rise in the PMI after two successive monthly falls is a big relief and puts the recovery back on track,” he noted in comments attached to Markit’s report. “On the downside, the PMI is signalling a mere 0.2 percent expansion of GDP in the fourth quarter, suggesting the recovery remains both weak and fragile,” hinting that “policy will remain ultra-accomodative for quite some time.”
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