Eurozone business resilient in face of Brexit uncertainties

AP News
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Posted: Aug 23, 2016 11:21 AM
Eurozone business resilient in face of Brexit uncertainties

LONDON (AP) — Business activity across the 19-country eurozone grew at a steady, moderate pace in August as the region continued to show little concern about the impact of a British exit from the European Union.

A gauge of activity in the services and manufacturing sectors in the eurozone, the so-called purchasing managers' index, rose slightly to a seven-month high of 53.3 points from 53.2 in July. The index published Tuesday by IHS Markit is on a 100-point scale, with the 50 mark separating contraction from growth in activity.

The result echoes the steady growth seen in July and confirms that businesses in the eurozone aren't overly worried about Britain's June 23 vote to leave the EU, the broader 27-country trading bloc that includes the eurozone.

Britain has yet to trigger the clause that will start negotiations on the nation's exit terms. It could take months for the country to invoke that clause and when it does, the actual departure will involve years of negotiations.

That has hurt business confidence in Britain, as it could affect the country's access to the single, tariff-less market of the 500-million strong EU.

The eurozone appears more resilient. Tuesday's survey suggests the eurozone economy grew at a quarter-on-quarter rate of 0.3 percent in the third quarter, the authors said.

"The eurozone remains on a steady growth path in the third quarter, with no signs of the recovery being derailed by 'Brexit' uncertainty," said Chris Williamson, chief business economist at IHS Markit.

The details of the survey, which is based on the response of executives from about 5,000 companies, nevertheless showed some potential weak spots. Expectations of future economic growth weakened. And while services activity was at a three-month high, manufacturing saw a drop in new orders.

Also, a separate report showed eurozone households were somewhat more concerned than companies. The consumer confidence index published by the European Commission fell slightly in August to -8.5 points, a four-month low, from -7.9 in July.

While there were no details available from the survey, analysts say the drop is likely due to concern about what the British vote could mean for the wider region's economy.