European Manufacturing, Services Contraction Weakens


Europe’s manufacturing and service industries contracted at the slowest pace in nine months in June, adding to signs the recession is bottoming out.

A composite index of both industries for the 16 euro nations rose to 44.4, the highest since September, from 44 in May. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates a contraction.

The European economy is showing signs of stabilization after shrinking at the fastest pace in at least 15 years in the first quarter. German and French business confidence rose for a third month in June, reports showed this week. European Central Bank President Jean-Claude Trichet said this month the worst of the recession may be past after the ECB cut interest rates to a record low and pledged to buy covered bonds to fight the crisis.

Markit’s manufacturing index rose to 42.4 this month from 40.7 in May, according to today’s report. The services index fell to 44.5 from 44.8.

The euro-area economy may shrink about 4.6 percent this year and around 0.3 percent in 2010, the ECB forecasts. Trichet said on June 4 that the economy may contract at much less negative rates” in the second half of the year. In the first quarter, gross domestic product dropped 2.5 percent.

Companies across Europe have been forced to cut output and eliminate jobs to weather the global slump. Stuttgart, Germany- based Porsche SE, the maker of the 911 sports car, said on June 19 that nine-month revenue dropped 15 percent.

Europe’s economy lost a record 1.22 million jobs in the first quarter with payrolls declining 0.8 percent from the previous three months. The jobless rate, already at a decade- high 9.2 percent, may jump to 11.5 percent in 2010, the European Commission forecasts.

European governments have boosted spending to bolster their economies, while the ECB this month kept its key rate at a record low of 1 percent. Gains in business and consumer confidence indicate that the measures may be starting to show results. Consumer confidence in Germany, the region’s largest economy, rose for a second month, data today showed.


Tradingeconomics.com, Bloomberg
6/23/2009 8:30:32 AM