An economic slowdown across the 19-country European bloc known as the “Eurozone” may prove to be deeper and last longer than previously expected according to a new survey.
Financial information firm IHS Markit said Wednesday that its Purchasing Managers’ Index for the Eurozone — a broad gauge of business activity — fell in May to an 18-month low of 54.1 points from 55.1 in April. The decline reinforces the argument that a first-quarter slowdown may not have been merely a soft patch. The survey found new order growth slowing and hiring easing throughout Europe, while companies are less optimistic about the future.
The survey suggests that second-quarter growth won’t beat the first quarter’s 0.4%. That was down on the 0.7% seen during the previous three quarters, which had helped the region expand by a decade-high rate of 2.5% during 2017. Most economists had thought the first-quarter slowdown was a blip. But the latest survey suggests the slowdown may be more protracted and could be due to the Euro currency, which raised the cost of Eurozone exports.
The Euro was down a further 0.5% at $1.1723 and near 2018 lows as the weakness in the economic data is likely to raise questions over when the European Central Bank will end its bond-buying stimulus program. The European Central Bank has indicated it could ease off stimulus further once inflation gets back to its goal of just below 2%, but so far inflation has remained stubbornly low — in the year to April, consumer prices were up a mere 1.2%.
