The eurozone’s private sector is growing at its fastest rate in four years, with business confidence boosted by the easing of the Greek debt crisis despite growing fears over global growth.
Improved confidence across the 19-member currency bloc prompted companies to hire more people last month to deal with rising business volumes. Spain was the star performer but growth in France almost ground to a halt, according to the latest PMI (purchasing managers index) surveys from Markit.
Its monthly snapshot of activity in the eurozone services sector climbed to 54.4 in August, from 54.0 in July. When the latest manufacturing data are included, the eurozone composite output index improved to 54.3, up from July’s 53.9.
Fears that Greece’s debt crisis might see the country evicted from the eurozone receded after it agreed a third bailout, worth €86bn (£63bn), with its creditors in return for further painful economic reforms. However, China’s economic slowdown and stock market turmoil have raised fresh fears over the state of the global economy, with the head of the International Monetary Fund, Christine Lagarde, warning this week that global growth will be weaker than previously expected.
Chris Williamson, chief economist at Markit, said: “Although global economic worries have intensified in recent weeks, the calming of Grexit fears has led to an improvement in the business environment across the eurozone ... The PMI is indicating euro area GDP growth close to 0.4% in the third quarter, a solid albeit unspectacular rate of expansion.”
Activity in France slowed to a seven-month low, with the final reading at 50.2, barely above the 50 mark that separates expansion from contraction.
By contrast, private sector growth in Germany hit a five-month high with a reading of 55 while Italy also registered 55, a four-year high. Its service sector grew at the fastest pace since the early days of the financial crisis.The readings point to 0.5% GDP growth in both countries in the third quarter, Markit estimates.
Growth in Spain and Ireland was even stronger, with readings of 58.8 and 59.7 respectively.
Williamson said: “It is Spain that remains the star performer among the largest eurozone countries, with the PMI signalling another 1.0% GDP growth spurt in the third quarter.
“The worrying deterioration of growth in France is a major concern, the PMI dropping below the flash reading to signal a near-stagnation of the economy in the third quarter, but the ECB will be reassured by the ability of the eurozone economy as a whole to withstand recent headwinds.”
The figures come before the European Central Bank’s latest monthly meeting. It could downgrade its inflation forecast and hint at future stimulus measures.
Separate official data showed retail sales beat expectations by rising 0.4% in July. ING economist Teunis Brosens said: “It seems as if the eurozone economy is temporarily immune to financial turmoil and economic setbacks, either close by in Greece or far away in China. The eurozone economy just continues its recovery, albeit at its typically European, very leisurely pace. For this reason we don’t expect any new fireworks from Frankfurt today.”
In the UK, the dominant services sector notched up the slowest growth in over two years. The PMI came in at 55.6, down from 57.4 in July and well below the most pessimistic of economists’ forecasts. Manufacturing remains lacklustre, with activity stuck at 52.5.
The composite index for the private sector, which includes construction, fell from 56.7 in July to 55.3, its lowest since May 2013, though still above the eurozone’s 54.4.
Markit said this suggested that Britain’s economy would grow by 0.5% in the third quarter, down from 0.7% in the second quarter. While hiring rates picked up slightly, they remain close to a two-year low.
Williamson said: “Even after allowing for the usual seasonal lull in business activity, August saw an unexpectedly sharp slowing in the pace of UK economic growth, which will add to current worries among dovish policymakers at the Bank of England.”
This article was written by Julia Kollewe and Graeme Wearden, for theguardian.com on Thursday 3rd September 2015 11.34 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010