Daily Management Review

Eurozone, China Slow Down in July


07/24/2015




Eurozone, China Slow Down in July
Following the Greek crisis, the economic growth rate in the Eurozone slowed down slightly in July.
The data released on 24 July show that the Markit Eurozone Purchasing Managers’ Index showed a decline from 54.2 in June to 53.7 in July.
 
This is the sixth-highest reading since mid-2011 and was slightly above the registered average for the first six months of 2015. The index was however lower than the expected 54.0 as predited by analysts.
 
It is notable that these results have despite a couple of nervous months for the Eurozone following the Greek economic crisis.
 
There was decline in the manufacturing sector which declined by 0.3 on the index to touch 52.5. The services sector also recorded a fall of 0.6 to clock 53.8.
 
Growth rates in the German and French economies fell with German growth rates clocking lowest in two months and French growth lowest in a three month period.
 
The Greek debt crisis managed to impact only slightly as shown by the growth index figures despite wide spread speculation since the last month, said Markit’s chief economist Chris Williamson.
 
Analysts are however optimistic that the Greek crisis had not managed to lay any significant impact on the overall growth rate in the Eurozone and this is indicative of the ‘business as usual’ for the region as a whole.
 
However, fragile recovery will slow in the second half of the year, says analysis as is indicated by July’s fall in the Eurozone composite PMI.
 
Jennifer McKeown, senior European economist at Capital Economics said that more decline in the coming months of August and September are a possibility and would indicate weaker growth.
 
 “July’s decline reflected falls in the manufacturing and service sector indices and follows yesterday’s disappointing drop in euro-zone consumer confidence, ” McKeown said.
 
 
On the other hand in the far East there was slide in the Chinese growth rate indicating that the threats to the economy had not yet faded away.
 
For China, the Markit purchasing managers' index for July declined to a fifteen month low of 48.2 from 49.4 a month ago. The reading for July was well below the expectations of 49.7.
 
China had noted a growth at the end of the last quarter. But the July figure shows that the quarter end growth had not rubbed off on the first month of the new quarter.

“There is downside growth risk in the Chinese economy,” noted Julian Evans Pritchard at Capital Economics.
 
However analysts are of the view that the recent policy easing has yet to fully feed through into stronger the economic activity and this has given the hope that the much weaker-than-expected PMI reading would not affect the predicted better near-term outlook.
This slip, analysts say, would help policy makers to make mid-term course corrections to prevent growth from slipping much further this year.
 
Further interest rate cuts and further reductions in the reserve requirement ratio are some of the policy corrections that analysts foresee and expect from the Chinese authorities in response to the dismal July growth figures.

With tight monetary policies and hike in China's real effective exchange rate, more direct action like fiscal spending, is expected by the analysts.
 
(Source: www.digitallook.com) 






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