Eurozone Output Continues To Decline

The global economy continues to be sluggish with demand weak in many regions. The Eurozone is no exception to this general malaise. Evidence for this has come in the shape of the latest Markit Purchasing Manager’s Index (PMI) reading. The April composite PMI reading came in at 46.5 which was the same value as the previous month. However, a value below the 50 mark implies that the economy under study (in this case, the Eurozone) is shrinking and the only good news to be had is that the rate of the slowdown is not accelerating.

Within the data, the PMI figure for Germany showed that its output fell for the second month in a row. Further concern about the German economy, long regarded as the powerhouse economy of not just the Eurozone, but the wider EU, came in the shape of the Ifo business climate index. The index, based on a survey of some 7000 businesses, is a measure of business confidence and it declined from a March reading of 106.7 to a value of 104.4 for April.

The Eurozone PMI reading showed that the private sector contracted less in April than it had in March, but it is still contracting.

The PMI data is seen as more evidence that the ECB may announce more stimulus measures at its next meeting. Some analysts are predicting that the ECB could cut its interest rate from its current level of 0.75% to attempt to encourage the borrowing by the business sector which could spur growth. However, given that interest rates are near to record lows, the problem is not interest rates per se but rather reluctance by the financial sector to lend and caution by businesses in an atmosphere where confidence is not an abundant commodity.