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25/09/2016

Eurozone business activity ‘strong’ despite Brexit

Euro & Finance

Eurozone business activity ‘strong’ despite Brexit

The eurozone economy is showing signs of resilience.

[Alex Guibord/Flickr]

Eurozone economic activity edged higher in August with few signs that Brexit-linked dangers were yet hurting the European economy, a closely watched survey showed Tuesday (23 August).

Meanwhile, Britain’s second largest housebuilder Persimmon said its reservation rate had risen an annual 17% since the start of July, shrugging off the impact of the Brexit vote, which some fellow builders have warned could slow the property market.

Data monitoring company Markit said the eurozone economy maintained its resilience despite Britain’s shock vote to leave the EU, with a strong showing from France as well as powerhouse Germany.

'Big Three' leaders insist EU not finished after Brexit

The leaders of Italy, France and Germany insisted Monday (22 August) that Britain’s shock decision to quit the European Union would not kill the bloc. Merkel suggested she could be flexible over EU budget rules, as Rome grapples to kickstart its stalling economy.

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Markit said the preliminary August reading for its Composite Purchasing Managers Index (PMI) for the eurozone rose to a seven-month-high of 53.3 points, up from 53.2 in July.

The PMI measures companies’ readiness to spend on their business and so gives a good idea of how the underlying economy is performing before official statistics are compiled and released.

Any reading above 50 points indicates the economy is expanding.

Markit chief economist Chris Williamson said the eurozone economy “remains on a steady growth path in the third quarter, with no signs of the recovery being derailed by Brexit uncertainty.”

Williamson said the better-than-expected July figures suggested the eurozone economy was growing at “1.2% percent (over 12 months), which is similar to that seen on average over the first half of the year.”

The IMF said last month that eurozone growth this year would hit a stronger-than-expected 1.6%, instead of the previously forecast 1.5%.

The fund warned however that growth in the currency bloc would drop to 1.4% next year as the Brexit effects kicked in.

ECB stresses 'readiness to act' in face of Brexit headwinds

European Central Bank policymakers warned of “new headwinds” for the eurozone following Britain’s vote to quit the EU, according to minutes of their July meeting released on Thursday (18 August).

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Howard Archer of IHS Insight said the “reasonable” PMI data “suggest the Brexit vote so far has not markedly hampered economic activity.”

The preliminary German composite index fell to a still strong 54.4 points, with companies booking fewer new orders than expected.

France’s PMI jumped to 51.6 points, the struggling economy’s sharpest rise in ten months.

British property market

Housebuilder Persimmon, which posted a 29% increase in first-half pretax profit to €409.8 million. said there was an increase in the number of people paying a fee to take a British property off the market.

While the result of the EU referendum has created increased economic uncertainty, customer interest since then has been robust with visitor numbers to our sites around 20% ahead year on year,” Chief Executive Jeff Fairburn said.

“Our private sale reservation rate since 1 July is currently 17% ahead of the same period last year.”

British casino operator Rank Group Plc said on Tuesday Britain’s decision to leave the European Union would have little or no direct impact on its performance, days after it dropped its joint bid to buy bookie William Hill Plc.

‘Dramatic deterioration’ in UK economy since Brexit

The British economy has suffered a “dramatic deterioration” in the four weeks since the UK voted to leave the EU, new figures on Friday (22 July) showed, prompting the country’s new Chancellor to warn he may have to “reset fiscal policy” in the autumn.

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Rank, the operator of Grosvenor casinos and Mecca bingo hall, said it was mainly a UK-focused business with limited exposure to non-sterling earnings. However, the company said any impact of Brexit could be driven by lower UK growth rates or loss of consumer confidence and spending power.

The company said trading in the seven weeks to 15 August had been positive and in line with management expectations.

Rank and online gaming firm 888 Holdings Plc abandoned their efforts to snap up William Hill via a cash-and-stock deal to create Britain’s largest multi-channel gambling operator by revenue.

But William Hill did not show any interest in engaging with the consortium and spurned two takeover proposals.