Growth ground to a halt in the euro zone’s private sector this month while China’s factory sector contracted for the first time in a year, surveys showed on Thursday, deepening evidence of a sharp slowdown in the global economy. The surveys were published just before European leaders meet for a crisis summit to hash out a second bailout of Greece and allay fears a debt default by Athens will poison access to the bond market for bigger states.
In the latest sign economic growth is dwindling, Markit’s Eurozone Purchasing Managers’ Indexes showed growth in the 17-nation bloc’s factory sector came to a standstill in July while its dominant service sector grew at its slowest rate in 22 months. “The large fall in the flash euro zone PMI in July provides further signs that the debt crisis may be starting to take a heavy toll on the economic recovery in the region,” said Ben May at Capital Economics. The debt crisis, which has so far pushed Greece, Ireland and Portugal into bailouts, shows no signs of losing momentum, raising fears in recent weeks that it will engulf Italy and Spain as well. But France and Germany reached a joint stance on a second bailout for Greece late on Wednesday, ahead of Thursday’s summit in Brussels, that would supplement a 110 billion euro ($156 billion)rescue plan for Greece launched in May last year.
It is expected to include fresh emergency loans to Athens from euro zone governments and the International Monetary Fund, and possibly a range of other austerity measures that have already put the brakes on growth across the region. The flash services PMI sank to 51.4 this month from 53.7 in June, its lowest level since September 2009 and falling far short of expectations for 53.0 but has been above the 50 mark that divides growth from contraction for nearly two years.
