Show Hide image

Dismal figures stoke fears of further eurozone downturn

Slumping private sector output, rising debt, and general malaise foreshadow further decline.

A fresh batch of eurozone data has reinforced fears that the economic downturn may be intensifying rather than easing.

Confidence in the eurozone sank deeper today as the release of dismal PMI figures reflected a loss of momentum in the bloc’s private sector activity, reversing signs of progress in September.

Markit’s Compositive Purchasing Mangers’ Index (PMI), which uses data from around 5,000 business within the 17-nation bloc, serves as a barometer for manufacturing performance and is seen as a reliable growth indicator. Figures below 50 represent contraction, with those above 50 indicating expansion.

Eurozone PMI figures dropped to a 40-month low of 45.8 points in October, down from 46.1 in September, its sharpest decline since June 2009.

This was driven by weaker-than-expected German PMI data, which contracted to 45.7 points from September’s index of 47.4 – its sixth month below the break-even mark of 50. French figures stood at 43.2 points, marking eight straight months of contraction in French manufacturing, despite a 1.6 point rebound from September.

In addition to weak domestic markets, subdued overseas demand, most notably from Asia and to a lesser extent the US, dragged down European manufacturing output.

“It’s very disappointing, it’s a depressing scenario as things are getting worse”, lamented Chris Williamson, chief economist at Markit.

“We are more down than the official data. The PMIs are running at levels historically consistent with GDP falling at about 0.6 per cent”, he added.

The gloomy outlook was confirmed by significant drops in Munich’s Ifo Institute’s business climate index, with figures dropping from 101.4 in September to 100.00 – the lowest reading since February 2010.

Also highlighting the decline, the composite employment index stood at a contractionary level of 46.4 points as firms sought to balance their books with lay offs. US automotive titan Ford axed almost 10,000 jobs after plant closures in Belgium, with Peugeot cutting roughly 6,500 jobs in France earlier this year.

“Businesses are very much in cost-cutting, retrenchment mode, battening down the hatches because they don’t know what the outlook is”, said Williamson.

Official data released earlier in October revealed an 11.4 per cent unemployment rate in August, the eurozone’s highest level since its inception in 1999.

Markets responded negatively to the dismal PMI data, with DAX in Germany down 0.4 per cent, CAC in Paris down 0.2 per cent, and FTSE 100 in London down 0.1 per cent.

The slump in eurozone manufacturing comes amid rising eurozone sovereign debt, which grew from 88.2 per cent in the first quarter to 90 per cent of GDP in the 2nd quarter, according to Eurostat.

Unsurprisingly, Greece was the most indebted state, with public debt worth 150.3 per cent of its GDP, up from 136.9 per cent in the first quarter. Italy and Portugal also clocked up high debt levels, with figures of 126.1 per cent and 117.5 per cent respectively.

The eurozone's lowest sovereign debt was claimed by Estonia, with debt levels of just 7.3 per cent of GDP.

Alex Ward is a London-based freelance journalist who has previously worked for the Times & the Press Association. Twitter: @alexward3000

Show Hide image

No, David Cameron’s speech was not “left wing”

Come on, guys.

There is a strange journalistic phenomenon that occurs when a party leader makes a speech. It is a blend of groupthink, relief, utter certainty, and online backslapping. It happened particularly quickly after David Cameron’s speech to Tory party conference today. A few pundits decided that – because he mentioned, like, diversity and social mobility – this was a centre-left speech. A leftwing speech, even. Or at least a clear grab for the liberal centre ground. And so that’s what everyone now believes. The analysis is decided. The commentary is written. Thank God for that.

Really? It’s quite easy, even as one of those nasty, wicked Tories, to mention that you actually don’t much like racism, and point out that you’d quite like poor children to get jobs, without moving onto Labour's "territory". Which normal person is in favour of discriminating against someone on the basis of race, or blocking opportunity on the basis of class? Of course he’s against that. He’s a politician operating in a liberal democracy. And this isn’t Ukip conference.

Looking at the whole package, it was actually quite a rightwing speech. It was a paean to defence – championing drones, protecting Britain from the evils of the world, and getting all excited about “launching the biggest aircraft carriers in our history”.

It was a festival of flagwaving guff about the British “character”, a celebration of shoehorning our history chronologically onto the curriculum, looking towards a “Greater Britain”, asking for more “national pride”. There was even a Bake Off pun.

He also deployed the illiberal device of inculcating a divide-and-rule fear of the “shadow of extremism – hanging over every single one of us”, informing us that children in UK madrassas are having their “heads filled with poison and their hearts filled with hate”, and saying Britain shouldn’t be “overwhelmed” with refugees, before quickly changing the subject to ousting Assad. How unashamedly centrist, of you, Mr Prime Minister.

Benefit cuts and a reduction of tax credits will mean the Prime Minister’s enthusiasm for “equality of opportunity, as opposed to equality of outcome” will be just that – with the outcome pretty bleak for those who end up losing any opportunity that comes with state support. And his excitement about diversity in his cabinet rings a little hollow the day following a tubthumping anti-immigration speech from his Home Secretary.

If this year's Tory conference wins the party votes, it’ll be because of its conservative commitment – not lefty love bombing.

Anoosh Chakelian is deputy web editor at the New Statesman.