Open Europe, an independent think tank on the European Union has cautioned premature optimism about an end to the year-long Eurozone recession. Recently released Purchasing Managers' Index (PMI) data on the Eurozone reached an 18-month high, at an expansionary reading of 50.4, hinting that the manufacturing and services sectors were now growing again. However, the group found troubling issues with using the PMI as a proxy for GDP. Firstly, the PMI only measures the private sector, and with heavily indebted governments, public spending remains a drag on growth. Furthermore, the data did not distinguish between countries, masking possible poor results from individual members which translate to greater imbalances in the Eurozone, a primary cause of the EU's problems. The PMI has also diverged from GDP at times, whilst a slightly expansionary reading could merely indicate the end of contraction as opposed to a sharp increase in growth. (VIEW LINK)
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