Another day, another round of cringe-worthy economic data out of Europe. The Markit Economics composite purchasing managers’ index (PMI) of 46.9 showed that economic output in the euro area continued to decline in April (pdf), though at a slightly slower pace than it did in March (anything less than 50 signals contraction). German business activity declined for the first time in five months.
The dismal data call into question policymaker predictions that the euro area will return to growth in the second half of the year.
“The PMI suggests that, having eased in the first quarter of the year, the eurozone’s economic downturn is likely to have gathered momentum again in the second quarter,” says Chris Williamson, Markit’s chief economist. “Strong downturns in France, Spain and Italy have broadened out to encompass Germany again…Unemployment, which hit a record high of 12.1% in March, also looks set to rise further, given the ongoing steep rate of job losses recorded by the survey in April.”
German economic weakness could actually be a positive for the euro zone as a whole. Germany has typically been resistant to anti-austerity measures, but poor economic growth could persuade German policymakers to change their tune.