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Tuesday, June 26, 2012

Eurozone economy

I took a look at the flash PMI data for the U.S. recently which showed weakening, but not contraction yet.  Here is a look at the latest Eurozone data.

Both manufacturing and services are well below the 50 level indicating contraction.  Both are at new lows for the year, but only manufacturing is below last fall's low.  No sign of recovery here yet.  Here is a look at the PMI vs GDP.

We can see that the GDP actually tracks rather well to the PMI.  After going negative late last year the GDP was positive in the first quarter.  I think the odds favor a negative print in the second quarter given the large decline in the PMI.

The latest data shows that Germany is succumbing to the weakness all around it.  Their PMI has dropped below its low from last fall.  France is in even worse shape. 

The employment index is clearly in a downward trend.  Germany is still above 50, but the rest of the Eurozone is contracting.  France has joined that down side part lately in a big way.

The most recent data shows downward economic pressure has increased in both France and Germany.  There clearly is no sign the worst is over yet.  Is Germany really going to be able to get support at home for more bailouts if things continue to deteriorate?  That support is already razor thin.  The situation still looks pretty grim over there.  Continued economic slow down will likely reduce imports from the U.S. and affect corporate profits negatively.


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