End of eurozone recession is in sight as PMI hits 18-month high

The eurozone enjoyed a welcome surprise yesterday with predictions that it will emerge from recession in the coming months.

Manufacturers in the 17-member bloc this month recorded the biggest monthly increase in output since June 2011, with the Purchasing Managers’ Index rising to a level that had not been seen for 18 months.

New orders fell only marginally, registering the smallest decline since August 2011.

The PMI index rose above the 50 mark for the first time since January 2012, up from 48.7 in June to 50.4.

Anything over 50 measures expansion, while below that is contraction.

The PMI measures the health of the economy in a single-figure scale and is considered one of the most important measures of economic growth.

Markit chief economist Chris Williamson said the revival is being led by a broad-based upturn in manufacturing, where growth surged to a two-year high.

“The best PMI reading for one-and-a-half years provides encouraging evidence to suggest that the euro area could at long last pull out of itsrecession in the third quarter,” he said.

But the positive news was tempered by new data showing China’s economy continued to lose momentum.

The HSBC flash China manufacturing PMI showed an 11-month low for the world’s second-biggest economy.

The flash data is published on a monthly basis, about one week before the final PMI data is released. Asian shares took a knock on the disappointing data.

Closer to home, output rose at the fastest rate for five months in Germany.

Service sector growth recorded a five-month high, while manufacturers reported the steepest monthly increase in output since February of last year.

In France, the rate of decline eased to the slowest since output began falling in March 2012.

This was buoyed by a return to growth in manufacturing, which reported the biggest rise in production for 17 months.

Ireland also returned to growth last month, according to the latest figures.

Manufacturing firms saw an improvement in overall business conditions in June as output and employment each returned to growth.

Countries in the periphery of the eurozone also welcomed a corresponding easing in the rate of job losses to the weakest since September 2011, though the rate of job cutting remained solid.

Mr Williamson said: “The survey data will therefore provide a summer fillip to policymakers, especially in terms of there being light at the end of the tunnel for austerity-hit periphery countries where political and social tensions have risen.

“The ECB in particular will be feeling much more confident in its expectation of the region returning to growth by the end of the year.” Source: Irish Independent