Austerity Grinch steals Europe’s Xmas

Another night of poor economic data from the Eurozone, not that this should come as any surprise. My base case under the current policy framework has long been a continually slowing Eurozone that would eventually reach even the strongest nations. I’ve stated that meme many times over the last 18 months:

Periphery nations weakening, France in the middle, Germany outperforming, but the whole ship slowly sinking.

And once again, unfortunately, the Markit PMI data follows along. These comments from Markit’s chief economist about last night’s release:

The Eurozone has slid further into decline at the start of the fourth quarter. The survey is running at a level which is historically consistent with the region’s economy contracting at a quarterly rate of over 0.5%. Official data have shown surprising resilience over the summer compared to the survey data, but the underlying business climate has clearly deteriorated markedly in recent months. While GDP may decline only modestly in the third quarter, a steeper fall looks to be on the cards for the fourth quarter.
The financial markets may have cheered the positive developments from policymakers in seeking to resolve the region’s debt crisis, notably the promise of bond market intervention by the ECB, but business appears to have been less impressed. Sentiment about prospects for the year ahead are now the gloomiest since early-2009, when the post-Lehman Brothers crisis was in full swing.
In addition to worries about the health of domestic markets, companies are also seeing demand weaken further afield, notably in Asia and, to a lesser extent, the US.
Worries about the outlook have translated into further job losses, suggesting companies are moving increasingly into cost-cutting mode. Even Germany is not immune, with October seeing the first back-to-back monthly fall in employment since early-2010.

Read more: http://www.macrobusiness.com.au/2012/10/austerity-grinch-steals-europes-xmas/