Eurozone business growth slows
Signs of slower growth, coupled with firms cutting prices at an even faster rate but still failing to drum up sales, will add to pressure on the European Central Bank ahead of its monetary policy meeting today.
“The euro area is still just about expanding but the direction is downwards and the risk is we get more of the same as we move through the next few months as the geopolitical factors weigh heavily,” said Ken Wattret at BNP Paribas.
“It’s pretty obvious the ECB is worried, and rightly so. The pressure will continue.”
Optimism about the future among service firms, which dominate the bloc’s economy, fell to its lowest level this year amid rising tension over Ukraine that triggered sanctions from the West and countermeasures from Russia.
Although the Ukrainian president’s press office said yesterday he had reached agreement with Russia’s Vladimir Putin on a “permanent ceasefire” in eastern Ukraine’s Donbass region, uncertainty about the situation on the ground remained.
The Kremlin later said the presidents had agreed on steps towards peace but a ceasefire had not been agreed between Moscow and Kiev because Russia is not a party to the conflict.
World markets jumped after the initial declaration before trimming gains — Britain’s top share index touched a 14-and-a-half-year high.
Markit’s Composite Purchasing Managers’ Index (PMI), which is based on surveys of thousands of companies across the region and is seen as a good gauge of growth, fell to an eight-month low of 52.5, well below July’s 53.8.
That final reading was also weaker than a preliminary estimate of 52.8, although it was the 14th month above the 50 line that denotes growth.
The eurozone economy stalled in the second quarter and private sector growth in Germany, Europe’s powerhouse, eased to a 10-month low in August.
- Reuters
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