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| The symbol of the Euro area in Willy-Brandt Platz, next to the EuroTower, the main building of the European Central Bank, Frankfurt am Main, Germany (Photo credit: Wikipedia) |
A composite index based on a survey of euro-area purchasing managers in services and manufacturing fell to 45.8, the lowest in more than three years, from 46.1 in September, London-based Markit Economics said today. Economists had forecast a reading of 46.5, according to a Bloomberg News survey. A separate factory index in China rose. In Germany, the Ifo institute’s business climate index unexpectedly dropped to 100.0 from 101.4 in September. The European Central Bank and the International Monetary Fund have both lowered their forecasts for the euro-area economy as governments cut spending to plug budget gaps, eroding consumer and export demand. Even so, the region’s debt burden rose to a record in the second quarter, reaching 90 percent of gross domestic product, another report showed today.
“The euro-zone recession is still getting worse,” said Holger Schmieding, chief economist at Berenberg Bank in London. “In a disappointing set of data, the fact that the Ifo expectations index did not decline further offers the only ray of hope. In this sense, the survey results today do not dispel the hope that the euro economy could turn the corner early next year.”
Ifo Expectations
Ifo’s measure of executives’ expectations was unchanged at 93.2, while a gauge of the current situation dropped to 107.3 from 110.3. The euro extended losses on the Ifo and PMI reports and ahead of the Federal Reserve’s policy decision later today. It traded 0.3 percent lower at $1.2943 at 11:45 a.m. in London. European stocks, which slumped 1.7 percent yesterday, advanced as technology companies rallied, with the Stoxx Europe 600 Index (SXXP) up 0.4 percent at 269.61.
In the U.S., the Fed Open Market Committee will decide on monetary policy at the conclusion of a two-day meeting later today, the last before the presidential election. Data on mortgage applications and new-home sales are also due. A gauge of euro-area manufacturing dropped to 45.3 in October from 46.1 in the previous month, today’s report showed. That’s the lowest in two months. An indicator of services output rose to 46.2 from 46.1.
Germany’s manufacturing gauge dropped to 45.7 from 47.4, while the service indicator slipped to 49.3 from 49.7. Euro-area governments may find it difficult to reduce deficits and lower their debt burdens, with at least five of the 17 nations using the single currency already in recession. ... Read more.
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