Is Europe getting back into recession?
As Europe’s leaders struggle to convince markets that their Greek debt problem-resolution-proposals are actually viable, and will really do the trick, last week’s flash PMI readings seem to have attracted rather less attention than they might. Nonetheless, the fact of the matter is that it is steadily becoming clearer that the current slowdown in Eurozone economic growth is turning into something more than just another one of those pesky “soft patches”. The pace of economic expansion in core Europe has slowed dramatically, falling back in July for the third consecutive month, according to the latest flash PMI. Commenting on the flash results Chris Williamson, Chief Economist at Markit said:
“The Eurozone recovery lost almost all of its momentum in July, recording the weakest growth since August 2009 when the recovery first began.”
Excluding the financial crisis, the July survey was the most downbeat since the Iraq war in 2003, and consistent with a flat trend in quarterly gross domestic product.
In fact the rate of expansion – the composite indicator registered just 50.8, only slightly above the dividing line between growth and contraction – was the lowest since August 2009, when the recovery was just starting out. More importantly (for the longer term) new business coming in showed only a very marginal increase in July, registering what was the smallest rise since demand for manufactured goods and services first started to return to growth back in September 2009. Levels of incoming new business fell in manufacturing for the second month in a row, declining at the fastest rate since June 2009 – with new export orders actually falling for first time since July 2009.
Both the graphs above shows that Europe may be on the verge of start of another recession. It would turn out to be a catastrophe if double dip do take place because this time ECB might not be in a position to print endless money as it has been doing since 2008 recession. This time the debt is too high and investors may shy away from Government Bonds.
A detailed analysis of EU double dip recession can be found at “Don’t Shoot The Messenger“.