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| Eurozone resilient after Brexit vote as output increases | Eurozone resilient after Brexit vote as output increases |
| (about 2 hours later) | |
| A return to growth in France and a solid pace of expansion in Germany have helped the eurozone shrug off the UK’s vote to quit the European Union. | A return to growth in France and a solid pace of expansion in Germany have helped the eurozone shrug off the UK’s vote to quit the European Union. |
| Economists feared the eurozone would suffer a damaging blow from the Brexit vote as exports to the UK became more expensive and business confidence waned. But those concerns appeared unfounded after the August composite IHS Markit survey – which brings together manufacturing, services and construction – indicated GDP growth across the 19-member currency zone will continue at 0.3% a quarter and 1.2% for the year. | Economists feared the eurozone would suffer a damaging blow from the Brexit vote as exports to the UK became more expensive and business confidence waned. But those concerns appeared unfounded after the August composite IHS Markit survey – which brings together manufacturing, services and construction – indicated GDP growth across the 19-member currency zone will continue at 0.3% a quarter and 1.2% for the year. |
| France posted a rise in output driven by the private sector, which increased output at the sharpest rate in ten months during August. The IHS Markit purchasing managers’ index jumped to 51.6, up from 50.1 in July, where a figure above 50 indicates an expansion in activity. | France posted a rise in output driven by the private sector, which increased output at the sharpest rate in ten months during August. The IHS Markit purchasing managers’ index jumped to 51.6, up from 50.1 in July, where a figure above 50 indicates an expansion in activity. |
| The better-than-expected news for François Hollande, follows a report showing that France’s unemployment rate fell below 10% in the second quarter, the lowest level since the French president took office in 2012. | The better-than-expected news for François Hollande, follows a report showing that France’s unemployment rate fell below 10% in the second quarter, the lowest level since the French president took office in 2012. |
| In Germany, a slowdown in the services sector was offset by strong export growth reported by manufacturers. The balance left the economy with slightly lower growth, but employers still faced large backlogs of work and increased employment to match the buoyant outlook. | In Germany, a slowdown in the services sector was offset by strong export growth reported by manufacturers. The balance left the economy with slightly lower growth, but employers still faced large backlogs of work and increased employment to match the buoyant outlook. |
| Political instability continues to threaten the recovery in the eurozone as countries as diverse as Italy, Finland and Greece struggle to recover from the 20o8 financial crash. The refugee crisis and the longer-term threat of the UK leaving the EU are also high on European leaders’ agenda at a meeting in Naples this week, which seeks to breathe new life into the European project. | Political instability continues to threaten the recovery in the eurozone as countries as diverse as Italy, Finland and Greece struggle to recover from the 20o8 financial crash. The refugee crisis and the longer-term threat of the UK leaving the EU are also high on European leaders’ agenda at a meeting in Naples this week, which seeks to breathe new life into the European project. |
| Chris Williamson, chief business economist at the data provider, said that in the short term there were “no signs of the recovery being derailed by Brexit uncertainty”. He said: “The survey data are consistent with the region’s GDP growing at a quarterly rate of 0.3% in the third quarter, or 1.2% annualised, which is similar to that seen on average over the first half of the year.” | Chris Williamson, chief business economist at the data provider, said that in the short term there were “no signs of the recovery being derailed by Brexit uncertainty”. He said: “The survey data are consistent with the region’s GDP growing at a quarterly rate of 0.3% in the third quarter, or 1.2% annualised, which is similar to that seen on average over the first half of the year.” |
| A sign that consumers are beginning to worry could be found in the European commission’s consumer confidence indicator, which dipped 0.6 percentage points to -8.5 in the August flash release. But Bill Adams, senior international economist at PNC Financial Services, said this was only slightly weaker than its -8.2 average in 2016 prior to the referendum and hit confidence less than the Brussels terrorist attack in March or early 2016’s financial volatility. | |
| The composite PMI found that German firms suffered a rise in input costs for the fourth consecutive month. However, inflationary pressures remained muted across the eurozone and growth, while steady, is likely to disappoint officials at the European Central Bank, who have pumped billions of euros into the financial system in a bid to increase growth and boost prices. | |
| Williamson said: “While the resilience of the PMI in August will add to the belief that the ECB will see no need for any immediate further stimulus, the weakness of the overall pace of expansion and disappointing trends in hiring, order books, business optimism and prices all suggest that policymakers will keep the door open for more stimulus later in the year.” | Williamson said: “While the resilience of the PMI in August will add to the belief that the ECB will see no need for any immediate further stimulus, the weakness of the overall pace of expansion and disappointing trends in hiring, order books, business optimism and prices all suggest that policymakers will keep the door open for more stimulus later in the year.” |