Eurozone Data Indicate ‘New Recession’: Markit

Falling demand hits factories, unemployment highest on record

Neither September nor the two months preceding were good months for the eurozone. Factories saw demand fall and countries saw unemployment rise as Markit Economics said the activity—or, rather, lack of it—indicated a “new recession.”

Reuters reported Monday that according to Markit Economics’ eurozone purchasing managers' index (PMI), factories in the eurozone were hard hit in the three months to September despite cutting prices. Although September’s PMI actually increased to 46.1 from August’s level of 45.1, it clocked its fourteenth month below 50—the level that denotes economic contraction.

"Despite seeing some easing in the rate of decline last month, manufacturers across the euro area suffered the worst quarter for three years in the three months to September," Chris Williamson said in the report. Williamson, chief economist at Markit, continued, “The sector will act as a severe drag on economic growth. It therefore seems inevitable that the region will have fallen back into a new recession in the third quarter."

Bloomberg reported that unemployment in the region was also at its highest level on record. The European Union’s  statistics office in Luxembourg released figures Monday indicating that the August level of joblessness was 11.4%, the highest since the data series began in 1995. Figures for June and July unemployment were revised upward, and reflected the same 11.4% rate.

“There is simply not enough growth in the euro region to create sufficient jobs and the unemployment rate still has not reached its peak,” said Thomas Costerg before the report was issued. Costerg, an economist at Standard Chartered Bank in London, was quoted saying, “A worrying trend is that the number of unemployed is now also expanding in core countries like Germany, which had been rather sheltered up to now.”

Although Germany’s unemployment rate stayed at 5.5% for the month of August, the country’s Federal Labor Agency had said last week that the number of people without jobs rose in September for the sixth straight month. Eurostat said that unemployment in France was steady for August at 10.6%, while in Spain it rose to 25.1%. That’s the highest in the region.

“An end to the horror is not in sight,” said Carsten Brzeski in the report. Brzeski, senior European economist at ING Group in Brussels, was quoted saying, “Unemployment rates are still increasing and look set to increase further. It is no longer an exclusive peripheral problem as labor markets in core countries are also weakening. All of this could make unemployment the next big issue of the eurozone crisis management, making calls for more eurozone solidarity louder.”

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