LONDON — The eurozone is closing the gap between upbeat economic surveys and disappointing growth numbers. Unfortunately, the gap is closing the wrong way.
Earlier this year, optimism about the eurozone was boosted by strong showings in indicators such as Markit’s purchasing managers indexes and the European Commission’s economic sentiment survey. But growth failed to match up to that, slowing from 0.2 percent in the first quarter to zero in the second quarter.
Now the survey data is suggesting a less-rosy picture. The latest set of flash PMIs from Markit showed the eurozone composite index falling to 52.3 in September from 52.5 in August. Both manufacturing and services activity slowed.
The surveys are still pointing to growth, and most economists are forecasting an expansion of 0.2 to 0.3 percent in the third quarter. It is a mark of how weak the eurozone economy is that this would be a very welcome outcome — but it is far from signaling a strong and sustainable recovery.
Europe is responding but in lopsided fashion, relying largely on monetary policy. The European Central Bank has cut rates yet further and announced plans to buy covered bonds and asset-backed securities in an effort to get credit flowing, particularly once the ECB’s review of eurozone banks is completed in October.
