Euro Zone's PMI Manufacturing Adds To Recovery Signs, While Unemployment Raises Concerns

Daily Forex Fundamentals | Written by ecPulse.com | Dec 01 09 10:19 GMT |

Despite the improvement signaled recently in the euro zone, especially in the third quarter, the economy is still suffering from some problems resulting from the recession such as the escalating unemployment rate which is threatening recovery and raising concerns. The euro zone emerged from the recession in the third quarter by expanding 0.4% from 0.2% contraction recorded in the three months ending June thanks to the monetary and fiscal policies adopted by the ECB and national governments to stall the economic degradation. Policy makers at the ECB cut the borrowing cost to 1% and announced 60 billion euros stimulus plan to be spent on purchasing euro-dominated bonds to spur spending and lending and thereby giving an impetus to the economy that suffered the blues of the worst economic recession since WWII. In response, the economy showed remarkable progress starting from the second quarter by mitigating the pace of contraction to 0.2% from 2.5% in the first quarter. Sectors started to show expansion again as indicated by economic indicators and the improvement is continuing in the last quarter of the year. Today, PMI manufacturing for November final reading rose for the second month to 51.2 from 50.7 in October, providing evidence that the economy is on the right track. The reading was boosted Germany where the reading jumped to 52.4 in November from 51.0 a month earlier. However, France's manufacturing PMI dropped to 54.4 from 55.6 in October, but still the highest in the euro area, while Spanish manufacturing fell to 45.3 from 46.3. Outside the euro zone, PMI manufacturing in the U.K. slipped in November to 51.8 from 53.4 in October. The data released shows that recovery is gathering strength to start the New Year with clear strong figures. Later on this week PMI services will be released to show the status of the leading sector in the 16-nation economy. On the other hand, jobless rate is inclining which means that although the economy is expanding, companies are still shedding jobs to cut expenses. The rate soared today to 9.8% in October from 9.7% in September, close to the highest level in 11 years of 9.9%. There are 134,000 people lost their jobs, making 15.57 million jobless in October. Unemployment in Germany released today showed a decline to 8.1% in November from 8.2% in October. Now, the aggregate number of unemployed is 3.215 million people, down from 3.229 million people recorded in October. It seems that the government stimulus managed to lower the rate of job seekers, albeit at a low rate. This week, the ECB members to set the interest rate where it is expected to remain at the current low rate, while it mentioned recently that it is not going to continue its 12-month loans to banks. The OECD said that the ECB may keep the interest rate unchanged till the end of next year and it will reach 2% by the end of 2011. Analysts expect the economy to fully recovery in 2010, whereas the ECB said November that the European economy will expand 1% next year, higher than the previous projections of 0.3%, while this year the economy may contract 3.9% instead of 4.5% contraction expected in August. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk