Eurozone PMI Suggests Third Quarter Struggle

The euro traded steadily on Friday following disappointing PMI figures from the bloc’s largest economies.

The common currency traded at $1.3284 at 8:00 GMT as investors saw the possibility of further easing from the region’s central bank increase.

PMI data from Germany, the bloc’s largest economy, showed a sizable drop in August from June’s 55.7 reading.

Markit’s August PMI score for Germany was 54.9, above the 50 point mark that indicates growth, but below expectations. French figures were a bit better with the nation’s PMI increasing to 50 in August from 49.4 in July.

However, the numbers don’t tell the full story as according to The Wall Street Journal, the eurozone’s service sector covered up the growing weakness in manufacturing. Manufacturing companies cut jobs in August as they struggled with higher priced raw materials and difficulty competing in the global marketplace.

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The data confirmed what many were already speculating, that the eurozone economy will struggle again in the third quarter after posting just 0.2 percent growth in the second quarter.

Following the data’s release, JP Morgan reduced its forecast for the bloc’s third quarter growth to reflect annualized GDP of one percent.  The firm’s forecast comes as no surprise as investors are expecting the European Central Bank to be forced to intervene again in the coming months to help kick start the stalling economy.

With a slowdown already on the horizon, tension between the bloc and Russia will likely hurt the economy even further.

Russia has responded to stricter sanctions from the US and the EU by implementing sanctions of its own, something that will likely squeeze the eurozone economy even further.

Posted In: NewsEurozoneForexGlobalFederal ReserveMarketsEuropean Central BankMarkit
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