The industry in the euro zone in 2014 ended on a low note – Echoes (Blog)

Jonathan Cable

LONDON, Jan. 2 (Reuters) – Manufacturing activity in the euro area in 2014 ended on a mixed note, new orders and employment only recorded that moderate growth, showed Friday the final results of monthly surveys Markit.

The continued weakness in industrial activity could provide an additional argument to the European Central Bank (ECB) to adopt new stimulus of the economy, including the purchase of sovereign debt.

The monthly survey from Markit purchasing managers in the industry shows that companies lowered their prices for the fourth consecutive month at the risk of fueling deflationary risks in the region.

Manufacturing activity emerged in weak growth in Germany, leading economic power in Europe, and she fell for the eighth consecutive month France, second largest economy in the euro area.

The situation is hardly more encouraging in Italy, where the contraction was at its fastest pace in more than a year and a half.

“Manufacturing activity in the euro area has generally stagnated again in December, after a year in which an initial recovery that seemed promising dissipated before stagnating in the second half” said Chris Williamson, chief economist at Markit.

The manufacturing PMI rose to 50.6 after the 17-month low hit in November to 50.1, but the final result is less than the initial estimate of 50.8 published in mid-December.

A BAD SIGN FOR GROWTH IN 4TH QUARTER

If the index is au above the 50 mark separating growth and contraction, there is little evidence to suggest an improvement, the sub-index of new orders being only 50.2, indicating a near-stagnation, and staff companies have barely increased.

The sub-index of production, which in the calculation of the composite PMI expected next Wednesday, fell to 50.9 after a preliminary assessment to 51, 2. The final December figure is the lowest since June 2013.

Chris Williamson believes that the results of the PMI survey suggest a growth of only 0.1% of gross domestic product (GDP) of the region euro in the fourth quarter, after 0.2% in the third.

If confirmed, this renewed weakness in the economy of the euro zone could convince the ECB to take the step of purchase of sovereign debt, which is the subject of intense debate within the Council of the institution’s governors.

In an interview with German daily Handelsblatt, Mario Draghi, the president of the central bank , said Thursday that the risk that the ECB will not be able to preserve price stability was higher than six months ago, and he explained that the institution was “in full technical preparation” of any further steps “early 2015″.

His comments fueling speculation about the possible launch of a new quantitative easing scheme (QE) in one of the next monetary policy meetings have dropped Friday as the euro 1.2040 dollar for the first time since June 2010.

According to a Reuters poll published last month, the European Central Bank will buy sovereign debt in the coming months against the threat of a deflationary spiral

(Claude Chendjou for the French service, edited by Marc Angrand)

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