LONDON, Sept 29 - The euro zone PMI has likely nudged nearer a level that would mark the resumption of economic growth, but weak demand and the slow economic recovery may have kept it under 50 for the seventh month, a poll showed. The mid-range forecast from 26 economists polled September 24-26 saw the Eurozone Purchasing Managers' Index inch up to 49.7 in September from 49.1 in August. Forecasts ranged from 49.3 to 50.2. The index of around 3,000 manufacturing firms, one of the euro zone's most closely watched economic indicators, is scheduled for release at 0800 GMT on Wednesday, October 1.
"This is broadly in line with other surveys which are showing an edging up in expectations and confidence in the euro zone but nothing spectacular," said Stephen Webster at 4CAST in London. "As far as the euro zone is concerned, I don't think there is any hard evidence of a recovery of any extent yet... It's just hope rather than hard data at the moment." With the euro zone's economic recovery still lagging behind that of the United States, most economists expect the PMI to remain under the 50 watershed which separates growth from contraction for a while longer amid mixed recent data. Germany's Ifo and ZEW indicators showed that optimism is growing in the euro zone's largest economy. But business confidence data from Belgium -- seen as fairly representative of the euro zone as a whole -- and Italy both fell in September. "It's not until hopes are corroborated by things like industrial production and gross domestic product (GDP), or some of the other leading indicators, that you'll see confidence really take off," said Webster.
Twelve of the 18 economists who answered the question think the PMI index will conquer the 50 level in September or October. The rest say it will be later this year or early next year. The majority of economists polled for the August PMI had forecast that the 50 mark would be breached in September.
JOBS HURT, COOLER WEATHER HELPS
Of the survey's components, employment was seen lagging. "We have seen some recovery in orders, we have seen some recovery in output but what's keeping it below 50 is the labour market," said James Carrick at ABN Amro in London. "Companies are still trying to reduce their debt, to cut costs and that means they're going to have to sack more and more workers over the coming months to try to improve profitability." On the plus side, a healthier U.S. economy was expected to have resulted in higher foreign demand for European goods and the end of the summer's stifling heat was also seen pushing the PMI to its third consecutive monthly rise. The oil price jump sparked by a surprise output cut from OPEC as well as the recent euro strength likely came too late to affect the current survey, but may impact future data, pushing the conquest of the 50 level further into the future. "The recent developments... mean that a temporary setback is possible should oil prices and euro gains continue in the next few weeks instead of being a one-off phenomenon," said Timo Klein at MMS International in Frankfurt.
"In a pessimistic scenario it could be December or January before the 50 level is taken in a sustained fashion." The companion survey on the euro zone services sector, which accounts for about two-thirds of the region's economy, is due October 3. The mid-range of 24 forecasts saw the index nudge up to 52.5 in September from 52 the previous month.//