LONDON – Economic growth across the 19-country eurozone is showing further signs of faltering following a strong start to the year.
A closely monitored survey of business activity shows that output growth in May slowed to its weakest rate since early 2015.
Financial information company Markit said Monday that its flash composite purchasing managers’ index — a broad gauge of business activity across the services and manufacturing sectors — fell to a 16-month low of 52.9 points in May from April’s 53.0. Anything above 50 indicates expansion.
The reading, which is based on approximately 85-90 per cent of the final number of replies to the survey, is the latest in a series of indicators pointing to waning eurozone growth following a perky start to the year. Though Germany and France, the eurozone’s top two economies, performed robustly, there was a cooling elsewhere.
Chris Williamson, Markit’s chief economist, said the survey adds “further to the suggestion that the robust pace of economic growth seen in the first quarter will prove temporary.”
Markit’s survey points to second-quarter quarterly growth of 0.3 per cent, which would be lower than the 0.5 per cent recorded in the first three months of the year. The first-quarter performance came in the face of huge volatility in global financial markets largely connected to uncertainty over the slowdown in China. Factors that helped the eurozone during the first quarter included further stimulus measures from the European Central Bank, a lower euro that helped boost exports, and falling prices that increased consumers’ spending power.
The slowdown that appears to be taking place has been predicted by many economists not least because many of the factors that previously buoyed growth have largely played out, such as the fall in the value of the euro. The region also faces a number of headwinds in the months ahead, many beyond its borders, such as the British vote on June 23 on whether to leave the European Union and ongoing uncertainty over China.
Looking ahead, Williamson said the survey points to a further loss of momentum. Inflows of new work, he noted, showed the smallest rise for nearly a year-and-a-half, while optimism about the outlook in the services sector sank to its lowest since July 2015.
“The survey therefore paints a picture of a region stuck in a low-growth phase, managing to eke out frustratingly modest output and employment gains despite various ECB stimulus ‘bazookas’, a competitive exchange rate and households benefiting from falling prices,” Williamson said.