European PMI Readings Point to Gloomy Outlook, Increases Worries of Recession

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Researched by Industrial Info Resources (Sugar Land, Texas)--The widely watched leading survey, the Purchasing Managers Index (PMI,) showed anemic performance of the European economy, while the emerging markets performance improved slightly in August 2012. The Euro zone PMI figures increased 1.1% to 45.1 in August. It was still remaining deep in concretionary territory, according to survey compiled by research company Markit.

A reading above 50 indicates expansion in manufacturing activity, while a reading below that signals contraction.

In Germany, which has the European Union's biggest economy, the PMI increased by 1.7% to 44.7 in August 2012. The Italian manufacturing PMI dropped to 43.6 in August, showing ongoing distressed business confidence in the manufacturing sector. In the United Kingdom, the PMI rose to a four-month high of 49.5 in August from a downwardly revised 45.2 in July.

"The manufacturing sector is on course to act as a drag on gross domestic product in the third quarter," said Rob Dobson, senior economist at Markit in London. "The improvement is unlikely until regional structural issues are addressed and the broader global backdrop brightens," he said.

Also, the PMI for China fell to 47.6 from July's 49.3, the lowest since March 2009, Markit data showed.

The PMI of five out of six European Union countries fell, and only Turkey's improved. The PMIs of Russia, Turkey, and South Africa were above 50, signaling continued growth in these economies, which are more removed from the Euro area economies. Central Europe economies signaled downward growth pressures with Czech Republic, Hungary and Poland PMIs all below 50.

Also, Turkey's manufacturing production recovered slightly in August 2012, indicating business conditions improved amid the impacts of the Euro zone crisis. The PMI reading returned to neutral at 50 in August, having dipped into contractionary territory in July for the first time since March 2012. Despite the small gain on the month, manufacturing momentum remained in negative territory.

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