Recession Looms for Eurozone

Factory data, German employment picture worse than expected

The eurozone appears to be heading more precipitately for a recession, according to the latest data from the final Markit Eurozone Manufacturing Purchasing Managers Index for October. Levels were lower than expected, and the German unemployment picture was gloomy as well, rising for the first time in almost two years to 7%.

Manufacturing data for the euro zone fell at an accelerated rate in October, coming in at 47.1, its lowest level since July of 2009 and below a flash estimate of 47.3, according to Markit on Wednesday. Job growth, said the PMI survey, was weakest it has been since June 2010, and although most job creation occurred in Germany, it was insufficient to prevent the unemployment rate from increasing.

Although its rate of increase was the lowest in 12 months, the Nuremberg-based Federal Labor Agency said the adjusted jobless rate was up from 6.9% in September. Bloomberg reported that the increase was unexpected and it was the first increase in more than two years.

In a Reuters report, Alan Clarke, economist at Scotia Capital, was quoted saying, "It makes grim reading. If there was any doubt that the eurozone was headed for recession, these data should confirm it."

Rob Dobson, senior economist at Markit, said in the report, “The latest manufacturing PMI further emphasizes the marked reversal of fortunes for a sector that was the leading light of the economic recovery. Output, new orders and new export orders all suffered their fastest declines since mid-2009, against a backdrop of weak domestic market conditions, the ongoing debt crisis and a darkening outlook for the global economy.”

He added, “Signs of weakness are also becoming more prominent not just in the periphery but also the core, with the German PMI joining all of the other nations except Ireland in contraction territory.” The only bright spot was a slowing of inflation, he said.

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