Eurozone Economy Slows in July, Survey Shows
24 July 2017 - 7:21PM
Dow Jones News
By Paul Hannon
The eurozone economy slowed in July, according to a survey of
businesses, an indication that it may not perform as strongly in
the second half of the year as it has in the first.
The currency area has been one of the positive surprises this
year, as it outpaced the U.S. in the first quarter and appears to
have accelerated further in the three months to June.
Reflecting that surprising strength, the International Monetary
Fund on Sunday raised its growth forecast for 2017 to 1.9% from
1.7%, even as it cut its forecast for the U.S. to 2.1% from
2.3%.
The unexpected acceleration has brought the European Central
Bank's stimulus measures into focus, with policy makers set to
consider whether to extend a bond buying program, and if so at what
scale, in September or October. Speaking Thursday, ECB President
Mario Draghi said the currency area is "finally experiencing a
robust recovery."
However, a survey of purchasing managers at 5,000 manufacturers
and service providers across the currency area suggests the
recovery may already have peaked.
Data firm IHS Markit on Monday said its composite Purchasing
Managers Index for the eurozone fell to 55.8 in July from 56.3 in
June. That was below the 56.2 reading expected by economists who
were surveyed by The Wall Street Journal last week, and a six-month
low. A reading above 50.0 signals an increase in activity, while a
reading below signals a decline.
The decline in the PMI is unlikely to signal the start of a
sharp slowdown, since the surveys found that new orders remain
strong and businesses are continuing to hire. But it does suggest
growth may moderate to rates more in keeping with the typical pace
of the recovery since it began in mid 2013.
The survey also indicated that inflationary pressures remain
weak, as businesses raised their prices at the slowest pace since
January. Speaking Thursday, Mr. Draghi said the central bank would
be motivated by the desire to reach its inflation target, rather
than settle for stronger growth and lower unemployment without
meeting that goal.
"The slowing pace of economic growth signaled by the surveys and
the accompanying easing of price pressures adds to the belief that
ECB policymakers will be in no rush to taper policy, and will leave
adoptions open until the central bank sees a clearer picture of the
sustainability of the upturn," said Chris Williamson, chief
economist at IHS Markit.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
July 24, 2017 05:06 ET (09:06 GMT)
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