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Europe’s Economic Slump Widens

Posted by smeddum on August 5, 2008

Europe’s Economic Slump Widens Wall Street Journal
Factory Contraction,
Retail Sales Decline
Present Bleak Outlook
By EMMA CHARLTON and JOE PARKINSON
August 4, 2008
LONDON — Manufacturing contracted in 14 of the 15 euro-zone countries last month, with Germany’s slowed growth as the lone exception.

France, Italy, Spain Ireland and the Netherlands posted declines, a survey of manufacturers’ purchasing managers compiled by research group Markit Economics said Friday.

Germany’s purchasing-managers index fell to 50.9 in July from 52.6 in June. A reading below 50 indicates a contraction, while above 50 reflects expansion.

What had been a divergence among European economies turned into a unified retreat last month as tight credit and high oil prices stoked recession fears.

“The downturn is now regionwide. While the Spanish economy is clearly in recession territory, the outlook in the rest of the euro zone for the second half of the year has considerably deteriorated,” said Laurent Bilke, an economist at Lehman Brothers in London.

Outside the euro zone, activity in the U.K.’s manufacturing sector plunged to its lowest in a decade, while input and output prices surged at their fastest rate in the survey’s 16½-year history.

“Retail sales in the second quarter have been clearly weaker than in the first, stressing that private consumption will not give any helping hand to cushion the inevitable slowdown of the German economy,” said Carsten Brzeski, an economist at ING Bank.

Write to Emma Charlton at emma.charlton@dowjones.com and Joe Parkinson at joe.parkinson@dowjones.com

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