Eurozone Output Falls for Third Month

Most countries in Eurozone are contracting.

Manufacturing activity in the 15 countries sharing the euro fell for the third straight month in August, with output down in both the manufacturing and services sectors, according to a survey released on August 21.

The eurozone's purchasing managers' index (PMI), compiled by data and research group Markit, rose slightly to 48.0 in August from 47.8 points in July, according to the initial estimate. A level below 50 for the index indicates a contraction of activity in the sector.

The data, which could be revised later, "suggests that GDP (gross domestic product) probably stagnated in the third quarter, raising hopes that the region has not yet entered a technical recession of two consecutive quarterly declines," said Jacques Cailloux, head of Eurozone economics for RBS, which sponsors the survey.

"However, with forward-looking indicators such as new business and expectations in the service sector remaining close to survey lows, there appears to be little prospect of the economic picture improving in the coming months," he added.

The eurozone manufacturing activity index for August was put at 47.5 from 47.4 in July, also a third sub-50 reading.

The poor figures were nonetheless better than expected as analysts had predicted a manufacturing figure of 47 with the services sector at 47.9, making a composite figure of 47.3.

By country, the German index fell from 52.2 to 50.3, its lowest level in five years, consistent with broadly stagnant GDP while the French index was unchanged at 47.0.

"The message is clearly pretty downbeat. With virtually every index below the 50 boom/bust line, it looks like most sectors and countries in the eurozone are contracting," said Jonathan Loynes, Chief European Economist at Capital Economics.

The only "good news", he added, was that the composite output prices indicator eased from 55.8 to 53.7, "the first sign perhaps that price pressures in the region might be starting to ease".

Copyright Agence France-Presse, 2008

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