Euro-zone manufacturing activity shrank for the 14th straight month
in September and unemployment hit a fresh record in August, suggesting
prospects are worsening for a quick return to growth in the currency
bloc.
The reports indicate the euro bloc's
economic contraction deepened last quarter, making it even harder for
countries such as Spain and Italy to reduce government-debt levels amid
mounting strains on social spending.
Also hurting the EU's outlook Monday, Greece's international lenders
cast doubt on parts of Athens's plans to save billions of euros through
new cutbacks and tax measures, potentially throwing a wrench into the
government's efforts to reach a quick deal to unlock new aid for the
country.
The troika of Greece's international
inspectors—the European Commission, the International Monetary Fund and
the ECB—rejected as much as €2 billion ($2.57 billion) of austerity
measures, a senior finance ministry official said.
"They have asked for clarifications,
which we are providing," Finance Minister Yannis Stournaras said after
the inspectors met with Greek Prime Minister Antonis Samaras. "Talks are
continuing."
The report "reinforces the belief that the euro zone suffered further
[gross domestic product] contraction in the third quarter," said Howard
Archer, economist at consultancy IHS Global Insight. He expects
euro-zone GDP in the three-month period ended Sept. 30 to fall 0.3% to
0.4% from the second quarter, or around 1.5% at an annualized
rate—double the second quarter's decline. The euro zone hasn't posted
any growth since the third quarter of last year.
The
surveys confirmed earlier estimates that French manufacturing activity
slumped in September. The manufacturing index for France, the
second-largest euro-zone economy, fell to 42.7 from 46.0, suggesting the
country's stagnant economy could contract in coming months. French
President François Hollande's government last week announced a new set
of austerity measures to slow the rise in public debt. They are likely
to damp prospects for economic growth.
German manufacturing activity shrank at
a slower rate in September, Markit said, with the PMI rising to 47.4
from the August reading of 44.7. But the outlook for manufacturing was
clouded by a fall in new orders reported by the German industry group
VDMA.
The report exposed a deep divide within the euro bloc, with more than
55% of Greeks below 25 years old and 52.9% of young Spaniards
unemployed versus just over 8% in Germany.
The bloc's overall jobless rate was
11.4%, unchanged from the previous month and matching economists'
expectations in a Dow Jones Newswires poll. Eurostat revised July's rate
from 11.3% to 11.4%, which is a record high.
The reports "suggest that the industrial
sector is experiencing a sharp downturn and, with unemployment at a
record high, the outlook for the consumer sector is gloomy too," said
Jennifer McKeown, economist at the Capital Economics consultancy.
China's manufacturing survey for September showed a slight
month-to-month weakening, an official survey showed. Output declined in
Poland and the Czech Republic, according to purchasing manager reports.
These countries are heavy exporters to the euro zone, particularly to
Germany, and are feeling the effects of the Continent's downturn,
analysts said. Activity in Hungary, Turkey and Russia fared better,
according to the PMI surveys.
Other data Monday pointed to a weaker
global economy, undermining euro-zone exports and hopes of an economic
rebound in the 17-nation currency union.
