Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Report on Business

Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

Economy Lab has moved

Only Globe Unlimited members will now have access to a wide range of insightful commentary
and analysis on the economy and markets previously offered on this page.


Globe Unlimited subscribers will be able to read these columns,
written by some of Canada’s most deeply respected economists,
such as Christopher Ragan, Sheryl King, Andrew Jackson, and Clement Gignac,
as part of our ROB INSIGHT section.


All of our readers will still be able to browse the Economy Lab archives and read our
broader coverage of economic data and news by accessing their 10 free articles a month.


Learn more about Globe Unlimited and how to subscribe.

German Chancellor and top candidate for the Christian Democratic Union (CDU) Angela Merkel toasts with beer after her speech during an electoral rally in Dachau near Munich August 20, 2013. A new euro zone purchasing managers’ survey showed surprising strength. (MICHAEL DALDER/REUTERS)
German Chancellor and top candidate for the Christian Democratic Union (CDU) Angela Merkel toasts with beer after her speech during an electoral rally in Dachau near Munich August 20, 2013. A new euro zone purchasing managers’ survey showed surprising strength. (MICHAEL DALDER/REUTERS)

For Merkel, euro zone’s improving fortunes should be welcome news Add to ...

The euro zone produced more evidence that its recovery is under way, even if big chunks of the 17-country region struggle to juice up their economies.

A purchasing managers’ survey conducted by London’s Markit Economics revealed that economic activity in the euro zone has reached its highest level in more than two years. Stronger manufacturing output was behind the surprisingly robust figures.

More Related to this Story

Markit’s composite index, which measures both manufacturing and services, rose to 51.7 in August from 50.5 in July, the best figure in 26 months and somewhat ahead of economists’ predictions (a figure greater than 50 indicates expansion). The German manufacturing index was particularly encouraging.

“After a strong second quarter, many observers had predicted a quick slowdown of the German economy in the second half of the year,” ING economist Carsten Brzeski said in a note. “Up to now, it looks as if the economy is gaining rather than losing momentum. Germany confidence is not only benefiting strong domestic economic activity and hopes of a soft and not hard landing of emerging economies, but also from the latest improvements in the euro zone.”

The rising German output numbers will come as welcome news to German chancellor Angela Merkel and her Christian Democrats, who are campaigning for re-election.

While she has a double-digit lead in the polls, any good economic news will allow her to argue that the euro-zone crisis in general and the inevitable third Greek bailout in particular are not inflicting severe wounds on Germany and its taxpayers. As the euro zone’s largest economy, Germany would pay the single biggest share of another bailout.

“As long as most Germans are not personally affected by the euro crisis, disgust about a possible third bailout package for Greece should, in our view, abate quickly,” Mr. Brzeski said.

The Markit purchasing managers’ figure came a week after official figures showed that the euro zone, as a whole, emerged from an 18-month recession in the second quarter, with gross domestic product growth of 0.3 per cent.

The euro zone’s recovery masks considerable weakness in some countries. Italy, Spain and Greece remain in recession, though their rates of contraction are slowing and each could return to growth next year. France was the notable weak spot in Wednesday’s purchasing managers’ survey. French purchasing managers reported a contraction in August, as they did in July.

The back-to-back contraction suggests that France’s 0.5 per cent GDP growth in the second quarter is unlikely to be repeated in the final half of the year.

The survey will likely trigger some upward GDP revisions for the euro zone in the second and third quarters. RBC Capital Markets economist James Ashley said “we view this morning’s PMIs as indicating that although the pace of recovery in the euro area remains uneven, most economies are now seeing a general improvement in the growth outlook.”

Follow on Twitter: @ereguly

 

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories