Economists celebrate as Eurozone stays in recession

Posted: June 6, 2013 in Europe, Eurozone Economy
Tags: , , , , , , ,

The news out of the euro area was good yesterday. Yes, it is still in recession, but it has been in recession for a record length of time. No, there is no sign of the recession coming to an end, but at least the rate of contraction seems to be falling.

See it in terms of a football team that has been thrashed three games in a row, say seven nil, six nil and eight nil. Then it only gets beaten four nil, and the manager breathes a sigh of relief, fans go home smiling, things are getting better, they say.

The latest Purchasing Managers’ Index tracking the euro area was out yesterday. The index rose to a 15 month high.

In fact, it rose from 46.7 to 48.3. As Markit, which compiles the PMI data, said: “The seasonally adjusted Markit Eurozone manufacturing PMI indicated the slowest pace of contraction since February 2012.”

It is just that any score under 50 is meant to suggest contraction.

The PMIs for Germany, the Netherlands and Austria all hit three month highs; Italy rose to a four month high; France to a 13 month high; Greece to a 23 month high, and Spain to 24 month high.

That may seem impressive, but just bear in mind that in each case the PMI index was consistent with contraction.

Yes it is good news, and maybe it is a little harsh to compare it with a football team celebrating because it had only been beaten four nil, but neither does the data provide reason for much excitement.

PS: In Spain, there are signs of a gradual improvement – although unemployment remains awful. Talk is that the Spanish economy is beginning to have a more Germanic feel about it. Maybe in a few years’ time Spain, just like Germany, will be a great exporter… maybe. Just bear in mind that the global economy cannot afford too many Germanic type models, because if every country tries to export more than it imports the result will be economic depression.

© Investment & Business News 2013

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