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Germany’s service economy leads Eurozone recovery

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Germany’s service economy leads Eurozone recovery

Optimism in Eurozone recovery was in full swing Wednesday after Germany, the currency bloc’s largest and most influential state, reported better-than-expected services sector growth. Output in Germany’s services industry reached a six month high in August, signalling a solid pace of business expansion. The August data also showed steady job creation throughout Germany’s services industry, largely due to improving business confidence. Germany’s August PMI reading was 52.8, higher than the previous month’s 51.3 and beating expectations for 52.4, according to Markit Economics.

Germany’s services economy joined its manufacturing industry in achieving accelerated growth in August. Earlier in the week Germany’s manufacturing industry grew at its fastest rate in 25 months, adding to the broader Eurozone’s multi-year highs in manufacturing output.

The Eurozone’s services economy returned to growth in August with a PMI reading of 50.7, up from the previous month’s 49.8. Stabilizing new business flows and a slight reduction in backlog work underpinned the rebound, helping to end an 18-month period of contraction. Ireland recorded the highest rate of services expansion, while Spain saw a return to business growth.

Underpinning Eurozone recovery has been Germany, which experienced the largest growth of the big-four Eurozone economies during August. Total output growth reached a seven-month high on the heels of strengthening manufacturing and business activity. However, increased output failed to spur job growth, as employment fell for the third time in four months. In total, 32,000 more people were unemployed in August than the previous month.

The debate over Eurozone recovery will weigh heavily on German voters as they prepare to elect their next chancellor September 22nd. The handling of the Greece bailout continues to be a key talking point, as both Angela Merkel and opponent Peer Steinbrueck attempt to distance themselves from the prospect of a third bailout for the troubled Hellenic republic.

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