Euro zone reportedly pulling out of retraction

The Purchasing Managers’ Index (PMI) has reported that the euro zone has broken a cycle of retraction since January 2012 thanks to a combination of output rises in Germany and rates of decline easing in countries such as France.

The report, in which anything over 50 indicates growth, showed the euro zone area had a PMI of 50.4, up from 48.7 in June.

Manufacturers have reported the largest monthly increase in output since June 2011.  In contrast, the service sector – which contributes to 70% of the euro zone’s GDP – fell but showed the smallest decline in the past 18 months.

By country, Germany has posted the highest growth rates growing in both manufacturing and service sectors, while France has been buoyed by a return to growth in manufacturing, causing its rate of decline to ease.

The PMI report has come out just after the spring Eurobarometer, a report that measures the mood of the European Union as a whole, indicated a north-south divide over confidence on the European recovery. 

80 per cent of Swedes and 77 per cent of Germans expressed confidence of their countries’ economy, which contrasts with only 1 per cent of Spaniards and 2 per cent of Greeks and Cypriots. It appears that despite the positive results from the PMI, the 17-nation euro zone bloc remains deeply divided.

Peter Winnicki