Europe’s economy holds up as Greek crisis dents confidence
The euro-area economy maintained a steady pace of growth at the start of the third quarter, weathering strains on confidence from the debt crisis in Greece.
Markit said on Friday that its composite index of manufacturing and services slipped to 53.7 in July from 54.2 in June, which was a four-year high. That’s above the 50 mark that divides expansion from contraction, though it’s short of economists’ forecast for a reading of 54.
“Euro-zone economic growth lost only slight momentum in July amid the roller-coaster events of the Greek debt crisis during the month,” said Chris Williamson, chief economist at Markit in London. “The rate of expansion remained reassuringly robust to suggest that it was by-and-large ‘business as usual’ for the region as a whole.”
European Central Bank stimulus and a weaker euro are helping the 19-nation bloc to sustain growth even as turmoil related to Greece damages confidence. While sentiment in the services sector fell to the lowest this year in July, Markit said progress in the Greek bailout talks “suggest the pace of growth could pick up again in coming months.”
The manufacturing index for the euro region declined to 52.2 in July from 52.5 in June, while the services measure dropped to 53.8 from 54.4. Growth in new business across both industries also slowed this month, according to the report.
The euro began weakening after the release earlier on Friday of weaker-than-forecast PMI in France and Germany. It was at $1.0944 as of 9:08 a.m. London time, down 0.4 percent on the day.
Greek Risks
Markit said the euro-area economy may grow at least 1.5 percent this year provided there’s no re-escalation of Grexit concerns, “which is of course by no means assured.”
Flaws in the agreement Prime Minister Alexis Tsipras made with euro-area leaders last week are fueling concerns that Greece will struggle to implement the three-year program of reforms linked to its bailout funding. There’s still a chance it could be forced out of the euro next year, economists say.
In Germany, the region’s largest economy, the composite index slipped to 53.4 this month from 53.7. The factory gauge also declined and exports fell. Markit’s composite for France dropped to 51.5 from 53.3 in June, which was the highest in almost four years.
[Bloomberg]
