EU analyses indicate weakening downturn

05-21-2009 09:06

In May the downturn, which affects the 16 eurozone economies, weakened further, proved by Thursday’s analyses, which stimulated growth outlooks for the last quarter of 2009. The outlooks continue to forecast a downturn because every value under 50 is considered as a downturn. Nevertheless, the analyses also prove that the downturn is weakening as the closer the outlook is to 50 the less clear the contraction.

May PMI’s improve

The monthly purchasing managers' surveys for the services and manufacturing sectors are the major indicators for activity. These gauges increased in May to levels which are comparable to those during the fall down of the Lehman Brothers; the US investment bank, in September when the worldwide recession started its worst period.
The ‘flash’ reading for the manufacturing index went up from 36.8 in April to 40.5 in May. In the meantime the ‘flash’ reading for the services sector rose from 43.8 to 44.7. The composite gauge combines both indicators and this gauge increased for the third straight month from 41.1 to 43.9, reaching the highest level in eight months.

Eurozone’s GDP drops considerably

The eurozone Gross Domestic Product (GDP) dropped by 2.5% in the initial quarter of this year. In the meantime, especially Germany is affected by the fall in worldwide demand for its durable export products, such as heavy machinery and vehicles.

Hopes for weakening contraction

Daniele Antonucci, European economist for Capital Economics, stated: "This proves that, even though the economy recovers, we can only wish for a more weak contraction in GDP during the second quarter of 2009."
He went on by saying that the present level of the combined Purchasing Managers Index (PMI) runs parallel to the quarterly decrease of approximately 0.7% in the second quarter. However, he declared that the index misjudged the extent of the downfall in the initial quarter.