Business World

Thursday 20 July 2017

Weakened growth adds to fears of waning EU recovery

Emma Ross-Thomas

Growth in Europe's services and manufacturing industries weakened more than economists forecast in September, adding to evidence that the recovery in the region is losing steam.

A composite index based on a survey of euro-area purchasing managers in both industries declined to 53.8 from 56.2 in August, London-based Markit Economics said yesterday.

Economists expected a reading of 55.7, according to the median of 15 forecasts in a Bloomberg News survey.

A reading above 50 indicates expansion.

Growth in Europe is slowing as the global economy cools and austerity measures aimed at reducing budget deficits and reining in borrowing costs undermine the recovery.

Europe's expansion will slow to a more "moderate" pace in the second half, the European Commission projected last week.

"It's clear that cracks are emerging in the recovery story," said Martin van Vliet, a senior economist at ING Bank in Amsterdam.

"People were hoping that domestic demand would offset the drag from slower exports, but fiscal tightening is limiting the scope for domestic demand to pick up the baton," he added.

European stocks fell for a third day and the euro weakened against the dollar. The Stoxx Europe 600 Index slid 0.5pc to 259.88 at 3:06pm in London and the euro declined 0.7pc to $1.3317.

Euro-area growth probably slackened to 0.5pc in the current quarter from 1pc in the previous three months, the Brussels-based commission said last week. Industrial orders declined more than forecast in July, the European Union's statistics office said yesterday.

In Germany, Europe's largest economy, investor confidence dropped to a 19-month low this month, the ZEW Centre for European Economic Research in Mannheim said.

German business sentiment probably declined in September after an unexpected increase in August, according to the median of 36 estimates in a Bloomberg survey.

The Munich-based Ifo is scheduled to publish the indicator at 10am this morning.

The Brussels-based European Commission warned last week that economic growth may weaken to 0.5pc in the current quarter and to 0.3pc in the last three months of the year. (Bloomberg)

Irish Independent

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