Euro Zone Manufacturing Sentiment Rises
The recession in the 16 countries that share the euro eased slightly in June as conditions in the crucial manufacturing sector improved, closely-watched surveys found Tuesday.
Financial information company Markit said the purchasing managers index — a gauge of business of activity — for the manufacturing sector rose in June to 42.4 from 40.7 in May.
The improvement shows that the scale of the contraction in the sector diminished during the month. Though any reading below 50 indicates contraction, the nearer the 50 the lower the output drop.
The better performance in the manufacturing sector contrasted with what occurred in the services sector. Its purchasing managers index fell to 44.5 in June from 44.8 in May.
Combining the two, the composite purchasing managers index rose modestly to 44.4 in June from 44 the previous month. June’s reading was the highest since last September, when the most acute phase of the financial crisis began in the wake of the collapse of U.S. investment bank Lehman Brothers.
Tuesday’s figures add weight to the argument that the worst of the euro zone recession has passed but that recovery will take time. The manufacturing sector is particularly important to the euro zone economy — the main reason behind the 2.5 percent economic contraction in the first quarter of the year was a collapse in demand for high-value manufacturing exports, such as cars and heavy machinery, from places like Germany.
“June’s small rise in the euro-zone composite PMI confirms that, in comparison to the U.S. and U.K., there is less evidence that the green shoots of recovery are emerging in the region,” said Ben May, European economist at Capital Economics.
In a speech Monday, the European Central Bank’s president Jean-Claude Trichet warned that a renewed outbreak of financial turbulence could derail any recovery.
“Currently, we are still in the downturn phase — a downturn that globally is proving to be the deepest since the Second World War,” Jean-Claude Trichet told a business conference in Madrid. “While there are first signs that the pace of economic weakening is decelerating, we must remain alert. We are in uncharted waters, and there are still risks of a sudden emergence of unexpected financial turbulence.”
The European Central Bank has been criticised by many for not being as aggressive as the U.S. Federal Reserve or the Bank of England in cutting interest rates or pursuing unconventional measures, such as boosting the money supply.
Whereas the U.S. and Britain have shown some clear signs that recovery may not be too far away, the euro zone economic data has generally been pretty downbeat, though admittedly not as bad as a few months ago.
Last month, the European Central Bank cut its main interest rate to a record low of 1 percent and unveiled a limit asset purchase program. In contrast, the Fed and the Bank of England have cut their interest rates to below 0.25 percent and 0.5 percent respectively and unveiled massive programs to boost the money supply to get banks lending again.
6/23/2009 5:22 AM PAN PYLAS AP Business Writer LONDON