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Economy in Brief

by Carol Stone March 3, 2004

Just last week in this space [February 26], we noted that sentiment measures in two European countries are moving in contrary patterns. Business confidence has been improving in the Czech Republic and Slovakia while consumer confidence is eroding. We attributed that dichotomy to employment and unemployment trends.

Now, today, NTC-Research in London, compiler of Purchasing Manager surveys published by Reuters, reports that overall economic performance in the Euro-zone, i.e., in the manufacturing, services and construction sectors combined, maintained a firm growth path in the mid-50% range in February. However, employment continues to erode, easing for a second month to a reading just above 48%.

At the same time, data in the table below show that this employment weakness is not uniform across Europe. Germany has the worst situation, with jobs falling at many companies. Recent improvements in France and Italy, which had yielded net gains through January in the number of firms hiring more workers, paused in the February tally. Spain, by contrast, is keeping up quite widespread job growth. And a modest up trend is holding in the UK. The job contractions in Europe thus appear to be generated by labor market conditions specific to Germany, while other nations are mostly seeing more job opportunities. Moreover, even Germany is sharing in the expansion of business activity, with a quite respectable reading of 54.1 in its service sector for February. Accordingly, it looks that technology and external demand are fueling output growth throughout Europe, even as German labor markets are functioning less than optimally.

Selected Purchasing Managers Diffusion Indexes Feb 04 Jan 04 Dec 03 Feb 03 2003 2002 2001
Euro-zone Total Economy Output 55.4 56.2 55.8 50.0 51.2 51.6 50.5
Euro-zone Total Economy Employment 48.2 48.6 49.1 46.4 46.9 48.4 51.0
Service Sector Employment in Various Countries: Euro-Zone Total 48.2 48.7 49.6 45.9 46.9 49.4 52.5
  Germany 45.3 45.1 46.4 40.4 42.5 46.5 49.6
  France 49.6 51.1 50.3 50.3 49.6 52.0 56.0
  Italy 49.7 51.2 53.4 50.4 50.6 50.8 53.1
  Spain 54.1 53.4 54.7 49.0 51.2 51.7 53.6
  UK 52.1 51.7 51.9 47.7 49.0 48.0 50.8
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