The latest Purchasing Managers Index (PMI) for the 17 Eurozone countries indicates that all of the major nations are heading towards the path of recession.
The news has seen the Euro weaken against the US Dollar and Japanese Yen as investors look for safer havens elsewhere. The British Pound has stayed steady against the single currency as investors wait for tomorrow’s meeting of the Bank of England and its decision or whether to introduce further monetary easing measures.
The PMI readings were slightly up on Mays figures rising to 46.4 from 46.0 in May. However the news that Germany has slid into the list of countries facing contractions across its economy is worrying news. The threat of contagion from the periphery of the Eurozone appears to be seeping ever closer into the core nations despite the rate of decline decreasing for some nations. Spain and Italy continue to suffer amidst deep recessions with little sign that the pressure will ease any time soon.
Chris Williamson, Chief Economist at Markit said: “The final Eurozone PMI for June picked up slightly on May, but the rise failed to avoid the region seeing the strongest quarterly downturn for three years in the second quarter. The survey points to the economy having contracted by approximately 0.6% in the three months to June. Even Germany looks to have fallen into a renewed decline, though only a very modest drop in output is signalled. The pace of downturns in other major euro member states is far more worrying. Output in Italy has fallen by 1% in the second quarter, while declines of 0.6% and 0.5% are signalled for Spain and France respectively.
‘Job losses are mounting as a result of falling demand, as companies seek to reduce costs and prepare for the possibility that worse is to come. Service sector companies’ expectations for the year ahead showed one of the largest declines in the history of the survey, pointing to a huge drop in confidence due to the worsening political and economic crises.”
Business activity in Germany stagnated in June ending a period of eight months of growth and the beginning of contraction. The worst performing regions were once again Italy and Spain. Today also saw the government of Cyprus meet EU finance ministers to arrange the terms of its 10 billion Euro bailout.
The Euro has weakened against the Pound and the Dollar following the announcement. If doubts continue to rise against the Single currency then we can expect the Euro to make further losses against the pair as investors seek a safe haven.
The Pound to Euro exchange rate is currently trading at 1.244
The Pound to US Dollar exchange rate is currently trading at 1.558
The Euro to Australian Dollar exchange rate is currently trading at 1.217
The Euro to US Dollar exchange rate is currently trading at 1.251
The Euro to Pound exchange rate is currently trading at 0.802