Chasm opening between weak French and strong German economies

14:58 21/2/2013 - Πηγή: BankWars

The schism dividing the euro zone’s strong and weak economies deepened to include its core pairing in February as French firms suffered their worst month in four years in stark contrast to prospering Germany.

The gap between the two biggest economies in the euro zone

is now at its widest since purchasing manager surveys (PMIs) started in 1998, the latest sounding showed.

It dealt a blow to hopes the euro zone might emerge from recession soon, showing the downturn across the region’s businesses worsened unexpectedly this month.

The latest PMIs also suggest that the “positive contagion” across financial markets noted by European Central Bank President Mario Draghi in January may take a long time to filter through to the real economy.

“The improvement in the financial markets will not be enough on its own to kick start an economic recovery,” said Ben May at Capital Economics.

While businesses in Germany sustained a healthy rate of growth, French services companies fell into their worst slump since the nadir of the Great Recession in early 2009.

The PMIs poll thousands of companies each month and are firmly at odds with the upbeat mood on financial markets and improving investor confidence, suggesting the real economy is failing to improve behind a sheen of optimism.

Survey compiler Markit said the French data were more befitting of a struggling peripheral euro zone economy such as Spain or Italy, rather than a key growth engine with Germany.

“There are issues in the French economy which are being unmasked by the depth and severity of this crisis,” said Peter Dixon, global equities economist at Commerzbank.

He said France has major structural problems, and also said business activity may have been crimped by confusion over the government’s economic policies.

“That may well have been frightening the horses when it comes to businesses.”

Markit’s Eurozone Services PMI fell in February to 47.3 from 48.6, marking a year below the 50 threshold for growth and confounding expectations for a rise to 49.0 from more than 30 analysts polled by Reuters.

None of them forecast such a poor reading.

Markit said the latest PMIs pointed to the euro zone economy shrinking 0.2-0.3 percent in the first quarter, following an estimated 0.4 percent contraction at the end of last year.

Πηγή: Reuters