The Eurozone may be perking up if latest figures for the service sector are a good guide. The rate of contraction eased further in May with the purchasing manager’s index climbing to a seven month high. Business expectations in the Eurozone also rose to a 15-month high.
Traders say it all bodes well for a good second quarter and perhaps a return to growth by August. The 16-nation Eurozone’s economy shrank by two and a half percent in the first quarter, and is expected to continue to contract, but at a slower pace, in Q2. Unemployment continues to rise as manufacturers cut costs and retrench, with figures on course to hit 10 percent before the end of the year. They are already at a 10-year high. This is politician’s main worry now, among them France’s Finance minister. “This crisis has three stages, the financial one, the economic one, and finally the social stage, and that’s obviously the one that leaves the deepest scars, and hurts our citizens more than any other,” says Christine Lagarde. Prices at factory gates registered their biggest annual fall on record in April, indicating the possibility of negative inflation in months to come, and the downward price pressure will trim company profits further. Christine Lagarde gives a full-length interview on Euronews on Thursday night.