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Qatar Tribune
23-05-2025
- Business
- Qatar Tribune
Eurozone business activity contracts in May
Agencies Business activity in the eurozone contracted for the first time in five months in May, weighed down by surprising weakness in the services sector, the bloc's engine in the past, a closely watched survey showed Thursday. Europe's growth has trailed global peers, particularly the U.S., since the pandemic and predictions for a rebound have been proven wrong time and again as firms hold back investment, households sit on savings and governments fail to enact the sort of structural policies that would reduce inefficiency. The closely watched composite HCOB Purchasing Managers' Index (PMI) for the bloc dropped to 49.5 in May from April's 50.4, dropping below the 50 mark separating growth from contraction and falling short of the 50.7 expectation in a Reuters poll of economists. The figure is especially worrisome for services, the driver of growth in recent years, as it was the main culprit in the decline, although economists cautioned against reaching firm conclusions since the noise generated by rapidly shifting U.S. trade policy was a key factor. This week, the European Commission, the EU's executive body, cut its economic growth forecast for 2025 to 0.9%, from a previous prediction of 1.3%. The reduced output in services – 48.9 in May compared with 50.1 in April – stood in contrast with growth in manufacturing output of 51.5 in May, unchanged from April. 'The trade war is weighing on the eurozone economy, but likely mostly through the uncertainty channel rather than direct trade effects so far,' ING economist Bert Colijn said. 'Sluggishness remains the name of the game for eurozone economic activity, and risks seem to be to the downside for the short term as the trade war could intensify,' Colijn added. While even HCOB acknowledged that figures were weak, it said there was some good news in the outlook. 'There are reasons for confidence in the longer term,' HCOB chief economist Cyrus de la Rubia said. 'The recovery in manufacturing is broad-based, with encouraging signs coming out of both Germany and France.' 'Germany, in particular, might be gearing up to reclaim its role as the euro zone's economic engine, thanks to a potentially very expansionary fiscal policy,' he said. Germany plans a historic spending package to boost defense and invest in infrastructure. Signalling heightened expectations for the new German government, the Ifo Institute's monthly sentiment indicator rose a touch more than predicted this month and expectations rose sharply in both wholesale and retail trade. 'The German economy is slowly regaining its footing,' Ifo President Clemens Fuest said. Economists added that seven interest rate cuts by the European Central Bank (ECB) in the past year were also propping up sentiment and reducing cost, especially since the bank is still not done easing and a few more steps are likely. 'The fifth consecutive increase in the Ifo business climate index shows that German companies defied Trump's tariff shock also in May,' Commerzbank economist Joerg Kraemer said. 'Apparently, the positive effects of the ECB's rate cuts outweigh the higher tariffs.' Still, economists said the lukewarm readings on current business conditions combined with only a modestly optimistic outlook add up to tepid growth, fraught with downside risks. The ECB and the European Commission both see the eurozone growing by less than 1% this year, much like last year, and see risks tilted to more negative outcomes, especially if the trade war intensifies.
Globe and Mail
22-05-2025
- Business
- Globe and Mail
Euro zone economic rebound hopes dashed by services slump
The euro zone economy is still just limping along and a raft of surveys published on Thursday point to only lukewarm optimism among firms as services, the bloc's engine in the past, also appear surprisingly weak. Europe's growth has trailed global peers, particularly the U.S., since the pandemic and predictions for a rebound have been proven wrong time and again as firms hold back investment, households sit of savings and governments fail to enact the sort of structural policies that would reduce inefficiency. The closely watched composite HCOB Purchasing Managers' Index for the bloc dropped to 49.5 in May from April's 50.4, dropping below the 50 mark separating growth from contraction and falling short of the 50.7 expectation a Reuters poll of economists. The figure is especially worrisome since services, the driver of growth in recent years, was the main culprit in the decline, although economists cautioned against reaching firm conclusions since the noise generated by rapidly shifting U.S. trade policy was a key factor. 'The trade war is weighing on the euro zone economy, but likely mostly through the uncertainty channel rather than direct trade effects so far,' ING economist Bert Colijn said. 'Sluggishness remains the name of the game for euro zone economic activity, and risks seem to be to the downside for the short term as the trade war could intensify,' Colijn added. While even HCOB acknowledged that figures were weak, it said there was modest good news in the outlook. 'There are reasons for confidence in the longer term,' HCOB chief economist Cyrus de la Rubia, said. 'The recovery in manufacturing is broad-based, with encouraging signs coming out of both Germany and France.' 'Germany, in particular, might be gearing up to reclaim its role as the euro zone's economic engine, thanks to a potentially very expansionary fiscal policy,' he said. Germany plans an historic spending package, aimed at boosting defence and investing in infrastructure. Signalling heightened expectations for the new German government, the Ifo Institute's monthly sentiment indicator rose a touch more than predicted this month and expectations rose sharply in both wholesale and retail trade. 'The German economy is slowly regaining its footing,' Ifo President Clemens Fuest said. Economists added that the European Central Bank's seven interest rates cuts in the past year were also propping up sentiment and reducing cost, especially since the bank is still not done easing and a few more steps are likely. 'The fifth consecutive increase in the Ifo business climate index shows that German companies defied Trump's tariff shock also in May,' Commerzbank economist Joerg Kraemer said. 'Apparently, the positive effects of the ECB's rate cuts outweigh the higher tariffs.' Still, economists said the lukewarm readings on current business conditions combined with only a modestly optimistic outlook add up to tepid growth, fraught with downside risks. The ECB and the European Commission both see the euro zone growing by less than 1 per cent this year, much like last year, and see risks tilted to more negative outcomes, especially if the trade war intensifies. 'We think that uncertainty will continue to drive a negative momentum in the PMI figures, at least until the US and EU sign a (trade) deal,' Christophe Boucher at ABN AMRO Investment Solutions said.
Yahoo
24-03-2025
- Business
- Yahoo
Euro zone economy growth accelerates to seven-month high in March, PMI shows
By Indradip Ghosh (Reuters) -Euro zone business growth remained weak in March despite expanding at its fastest pace in seven months supported by an easing in the long-running manufacturing downturn but held back by slower growth in services, a survey showed. The slight improvement in the common currency bloc's business climate could gain more traction over the coming months as plans for a spending splurge in infrastructure and defence, particularly in Germany, raise optimism for a turnaround in Europe's economic fortunes. HCOB's preliminary composite euro zone Purchasing Managers' Index, compiled by S&P Global, rose to 50.4 this month from February's 50.2, its highest since August. It has remained above the 50 mark separating growth from contraction since the start of this year. Growth in activity was still meagre, however, and the index was below a prediction in a Reuters poll for a rise to 50.8. "The March PMI shows cautious further manufacturing output PMI soared ahead of a possible further escalation of the trade war. For the first quarter, this means that a positive GDP growth print is likely after stagnation at the end of last year," said Bert Colijn, chief economist at ING. "Expectations of significant defence and infrastructure investment help optimism about a more sustained recovery – especially in Germany, where the manufacturing PMI soared – but export orders could remain under pressure given the trade war and global sluggish demand." Business activity in Germany, Europe's largest economy, expanded at its sharpest pace in 10 months due to the first increase in manufacturing production in nearly two years. However, activity in the services sector lost momentum. In France, the bloc's second-biggest economy, activity contracted for a seventh consecutive month as business confidence fell to its lowest level since April 2020. Meanwhile in Britain, outside the European Union, the composite PMI hit a six-month high as a pick-up in services growth offset manufacturing's persistent contraction. That will offer some comfort to finance minister Rachel Reeves ahead of a challenging speech on the economy and the public finances this week. EURO ZONE GROWTH IMPROVING An index measuring the bloc's dominant services industry declined to 50.4 from last month's 50.6, below the Reuters poll forecast of 51.0. But a nearly three-year contraction in manufacturing eased and its headline PMI increased to an over two-year high of 48.7 from 47.6 in February. The Reuters poll had predicted it at 48.2. An index measuring factory output that feeds into the composite PMI showed expansion for the first time in two years. It jumped to 50.7 from 48.9, its highest since May 2022. Faced with higher costs, manufacturing firms raised prices charged. Both input and output inflation hit their highest in seven months. However, prices grew at a slower pace in the services sector. In a sign of improving sentiment among businesses, employment generation gathered pace this month. The composite employment index rose to 50.1 from 49.2, above breakeven for the first time in eight months. Sign in to access your portfolio
