Tuesday, 2 August 2016

Steady Euro-Area Factory Output Masks Worries in Periphery

In World Economy News 02/08/2016

Activity in euro-area manufacturing slowed in July as uncertainty following the U.K.’s vote to leave the European Union damped new orders.
A Purchasing Managers’ Index dropped to 52 in July from
52.8, slightly less than a July 22 estimate of 51.9, Markit Economics said Monday. In Germany, the currency bloc’s largest economy, output expanded at the fastest pace in more than two years, while momentum faded in Italy and Spain and production declined in France and Greece. A reading above 50 indicates expansion.
“The PMI points to steady manufacturing growth” but “dig deeper beyond the headline numbers and more worrying pictures appear,” said Chris Williamson, chief economist at Markit in London. “The problem is that growth is looking increasingly lop-sided, which will worry policy makers and add to calls for further stimulus from the European Central Bank.”
The survey is the latest sign that uncertainty unleashed in the aftermath of the U.K.’s June 23 referendum is beginning to take its toll. ECB President Mario Draghi said last month that visibility as to the consequences of Brexit remains low, but that he remains ready to act if needed.
A weaker euro led to the first increase in average purchase prices in a year, Markit said. Output charges continued to decline, while new-order growth decelerated in July from a six-month high.
Data on Friday showed that the region’s moderate recovery was fragile even before the British vote, with economic growth in the second quarter slowing to 0.3 percent from 0.6 percent in the previous three months.

Source: Bloomberg