Fall in eurozone PMIs highlights Greek threat to growth in the region

23rd April 2015


A drop in the eurozone composite Purchasing Managers’ Indices (PMIs) during April has heightened fears that Greece might already be starting to dampen growth in the region.

The decline in the headline economy-wide output PMI index from 54.0 to 53.5 – where above the 50 mark points to expansion – was in contrast to the consensus expectation.

Capital Economics, European economist, Jessica Hinds said: “The fall reflected declines in both the manufacturing and services components. Admittedly, April’s drop followed four consecutive rises that had taken the index to an 11-month high in March. Nonetheless, it chimes with the drops seen in both the German ZEW investor sentiment index and the flash measure of euro-zone consumer confidence in the same month.”

The limited country breakdown revealed a small fall in the German index, but at 54.2 it remains at a relatively high level and is consistent with fairly decent GDP growth. But the French composite PMI slipped to 50.2, suggesting that the early signs of a recovery in France’s economy in the first three months of the year should be treated with caution.

“The PMI for the region as a whole suggests that the region’s economic recovery failed to gain momentum at the start of the second quarter,” adds Hinds. “On the basis of past form, the composite PMI is consistent with quarterly GDP growth of about 0.4%, around what we expect to have seen in Q1. But looking ahead, there is a clear risk that the composite PMI falls further as concerns about the situation in Greece and a possible euro exit intensify, raising the threat of a renewed economic slowdown in the euro-zone.”

Anna Stupnytska, global economist at Fidelity Worldwide Investment added: “The tick down in today’s numbers is likely to be temporary, reflecting ongoing concerns about Greece as well as still-subdued global demand. However, a number of tailwinds are still supportive to Europe, including lower energy prices, a weaker currency, a more supportive fiscal stance as well as – crucially – the European Central Bank’s quantitative easing programme. Barring a disorderly resolution to the Greek crisis, the European recovery should remain on track and accelerate through the year.”

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