Growth in Europe is “stuck in a slow growth rut” and the continent is essentially going backwards, according to the latest PMI data released by Markit on Tuesday morning.
According to Markit, the eurozone saw a composite PMI reading of 53, slower than the month before, and lower than the reading that had been expected, 53.2.
The purchasing managers index (PMI) figures are given as a number between 0 and 100. Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the better. Today’s data is what Markit calls flash, meaning that the readings could be revised either up or down when the final readings drop at the end of the
Markit’s statement alongside the data said (emphasis ours):
The eurozone continued to show only modest growth in April, according to the latest flash PMI data. The Markit Eurozone PMI dipped from 53.1 in March to 53.0 in April, according to the preliminary reading based on approximately 85- 90% of normal monthly replies.
The PMI suggests the pace of economic growth at the start of the second quarter is marginally weaker than the average seen in the first quarter, and slightly slower than the average seen last year.
That line is key. Markit is essentially suggesting that the eurozone is essentially going backwards when it comes to growth.
Here’s what Chris Williamson, Markit’s chief economist had to say (emphasis ours):
The eurozone economy remains stuck in a slow growth rut in April, with the PMI once again signalling GDP growth of just 0.3% at the start of the second quarter, broadly in line with the meagre pace of expansion seen now for a full year.
A failure of business expectations to revive following the ECB’s announcement of more aggressive stimulus in March is a major disappointment and suggests that the modest pace of growth is unlikely to accelerate in coming months.
Here are the headline eurozone figures:
- Composite PMI: 53 against an expected 53.2, and 53.1 in March.
- Services PMI: 53.2, a two-month high. Economists had forecast a reading of 53.3, up from 53.1 last month.
- Manufacturing PMI: 51.5. Expectations were for a reading of 51.8, a small margin of growth from March’s 51.6.
Markit’s chart shows just how much Europe is struggling to find substantially, sustainable growth right now. Take a look:
As well as the headline figures, Markit released data individually on the eurozone’s two biggest economies. Here’s how things look in Germany and France.
- German Composite: 53.8, down from 54 in March, a nine-month low.
- German Manufacturing: 51.9, up from 50.7 in March and a three-month high.
- German Services: 54.6, a six-month low, and a miss on expectations of the 55.2 predicted.
- French Composite: 50.5, a five-month high and well above March’s reading of 50.
- French Manufacturing: 48.3, missing expectations of 49.8, and a sharp contraction from last month.
- French Services: 50.8, up from 49.9 in March, and higher than the 50.2 reading expected.
The PMI figures come just a day after European Central Bank president Mario Draghi reiterated his belief that the bank’s monetary policy measures are working to address sluggish growth and inflation in Europe. “Overall, our measures in place since June 2014 have clearly improved borrowing conditions for firms and households” Draghi said at a press conference after the ECB left all of its bases rates unchanged on Thursday.
Draghi did admit however, that risks to growth in the eurozone are “tilted to the downside.”