Business World

Thursday 26 April 2018

Euro zone: Service sector growth stagnates after two years on rise reporters

More bad news for Europe as surveys show the traditionally strong euro zone service sector recorded no growth this month – it had been in an upward trend for the last two years.

Meanwhile, manufacturing activity, seen as a driving force for economic recovery shrank for the first time since September 2009.

As policymakers struggle to contain the euro zone's debt crisis, the surveys showing flat quarterly GDP growth indicate that the slowdown is spreading to Germany and other core countries in Europe.

According to Chris Williamson at data provider Markit: “There is a weakness in the core countries, Germany in particular. The euro zone is losing its main motor of growth.”

The flash Markit euro zone services Purchasing Managers' Index (PMI) fell to 51.5 this month from 51.6 in July, its lowest level since September 2009 but confounded expectations for a larger fall to 50.9.

The index, which measures activity of firms ranging from restaurants to banks, has now been above the 50 mark that divides growth from contraction for two years. Some of that growth was driven by firms fulfilling old orders, with the backlogs of work index falling to 48.8 from 49.6, its lowest since October.

The PMI for the manufacturing sector slid to 49.7 - its first sub-50 reading since September 2009 - although economists had predicted a marginally steeper fall to 49.5.

Output in the sector held steady, with the index at 50, down from July's 50.2 and its lowest since July 2009.

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