Euro zone economy ended 2014 in poor shape: PMI

January 6
7:39 AM 2015

The euro zone economy ended 2014 with its worst quarter for over a year as further price cutting failed to significantly drive up business activity, adding pressure on the European Central Bank to act, surveys showed.

Also of concern to policymakers, the surveys highlighted an ongoing downturn in France and Italy and only a stuttering performance in Germany, Europe's largest economy.

"The weakness of the PMI in December will add to calls for more aggressive central bank stimulus, including full-scale quantitative easing, to be undertaken as soon as possible," said Chris Williamson, chief economist at survey compiler Markit.

Markit's final December Composite Purchasing Managers' Index (PMI), based on surveys of thousands of companies across the region and seen as a good indicator of growth, missed an earlier flash reading of 51.7, coming in at 51.4.

While beating November's 16-month low of 51.1 and marking the 18th month the index has been above the 50 level that separates growth from contraction, Williamson said the indicator pointed to fourth quarter GDP growth of just 0.1 percent.

"The euro zone will look upon 2014 as a year in which recession was avoided by the narrowest of margins, but the weakness of the survey data suggests there's no guarantee that a renewed downturn will not be seen in 2015," Williamson said.

Last week, ECB President Mario Draghi fanned expectations he would take bolder steps when the Governing Council meets on Jan. 22, saying the central bank stood ready to respond to the risk of deflation.

Risks of a deflationary spiral - consumer price data for the euro zone due on Wednesday is widely expected to show a fall in annual terms - will push the ECB to buy sovereign debt early in 2015, a December Reuters poll showed.

A composite PMI sub-index showed firms have been cutting prices for nearly three years. It came in at 48.1, up from November's 47.6.

That ongoing discounting had only a marginal effect on a PMI covering the region's dominant service industry as it nudged up to 51.6 from November's 51.1, missing a flash 51.9.

And some of that activity was again driven by firms running down old orders. A PMI covering backlogs of work was below 50 for a seventh month at just 47.8, well shy of the 48.6 flash reading.

© 2023 VCPOST, All rights reserved. Do not reproduce without permission.


Join the Conversation

Subscribe to VCpost newsletter

Sign up for our Deals of the Day newsletter.
We will not spam you!

Real Time Analytics