Business World

Thursday 18 January 2018

Germany now being hit hard by eurozone contraction

Paul Day and Jan Strupczewski

THE eurozone is stuck firmly in a sharp economic contraction, with the region's escalating debt crisis hitting Germany with increasing severity, according to a closely watched survey.

Purchasing managers' indices for the 17-country region showed private-sector activity shrinking at the same pace as in May, which was the fastest in almost three years. But Germany's economy, which has so far saved the eurozone from recession, suffered a big deterioration, especially in its manufacturing sector -- indicating its exporters were being affected by gloomier global conditions.

"The downturn is gathering pace and spreading across the region," warned Chris Williamson, chief economist at Markit, which produces the survey. "Of particular concern is the near-record deterioration in business optimism, combined with marked falls in employment and purchasing by companies," he said.

Bright spot

He said Germany was on course for a "marginal fall" in gross domestic product in the second quarter while other nations will likely face "far steeper declines".

One bright spot, however, was an improvement in the French purchasing managers' indices, which suggested some of the gloom about eurozone prospects had been overdone.

The weak readings increase the pressure on policymakers for fresh measures to boost growth -- and the chances of the European Central Bank cutting interest rates at its meeting on July 5.

Irish Independent

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