Eurozone PMI Fall Signals Deeper Slowdown

Date: Friday, March 22, 2019
Source: The Wall Street Journal

The eurozone economy’s weak streak is likely to have continued into the first quarter, with surveys of purchasing managers pointing to a further slowdown in activity during March after tentative signs of a rebound earlier in the year.

The prospect of continued weakness in the currency area is worrying news for the global economy, which faces a number of headwinds this year that are likely to slow growth, including an unresolved trade dispute between the U.S. and China.

As 2018 drew to a close, the eurozone’s $13 trillion economy appeared at risk of a slide into recession, a fate that has already befallen Italy, its third-largest member. Figures from January pointed to a slight rebound in growth, but surveys of purchasing managers--which have a good record of tracking economic growth--suggest that momentum faded in March.

The euro weakened against the U.S. dollar in response to the surveys, falling to a one-week low of $1.1289.

Data firm IHS Markit Friday said its composite Purchasing Managers Index--a measure of activity in the manufacturing and services sectors--fell to 51.3 in March from 51.9 in February, a larger fall than the dip to 51.8 expected by economists. A reading above 50.0 points to an increase in activity.

IHS Markit said the PMI readings over the course of the first quarter point to growth that is in line with that recorded in the final three months of 2018, when gross domestic product rose at an annualized rate of 0.9%.

“Forward-looking indicators such as business optimism and backlogs of work suggest that growth could be even weaker in the second quarter,” said Chris Williamson, IHS Markit’s chief business economist.

 

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