Germany’s factories lead Eurozone back to growth

 
Tim Wallace
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HOPES grew yesterday that the Eurozone economy could at last be getting back on the right track as private sector activity increased at its fastest pace for two years, according to an influential market survey.

And markets across the continent rose, hinting at improved confidence among investors.

German manufacturing activity led the expansion – output in the sector his 55.3 on Markit’s purchasing managers’ index (PMI).

A score of 50 indicates no change in activity, so the increase from 53.8 represents a move towards solid growth.

Overall German private sector activity improved to a PMI score of 53.4, up from 52.1 in July.

That led the Eurozone to an overall PMI score of 51.7, up from 50.5 in July.

Manufacturing output PMI increased firmly from 52.3 to 53.4, while the services sector also expanded with a score of 51, bouncing back from the slight fall at 49.8 in July.

But not all areas expanded – the French economy is still in the doldrums. Its services activity declined again, accelerating downwards from 48.6 to 47.7, and manufacturing returned to contraction, dipping from a PMI of 51.4 to 48.6.

“So far, the third quarter is shaping up to be the best that the euro area has seen in terms of business growth since the spring of 2011,” said Markit economist Chris Williamson. “The economic picture from the surveys is therefore coming into line with policymakers’ expectations of a modest yet still fragile return to growth.”

Even the troubled peripheral economies are expected to record improving conditions – exports are beginning to come back as the countries see labour and other costs fall in the so-called internal devaluations.

Meanwhile stock markets increased across Europe. The Eurostoxx50 increased 1.38 per cent on the day, France’s CAC40 jumped 1.1 per cent and the German DAX increased 1.36 per cent. Peripheral markets too rose, led by the Italian FTSE MIB which increased 2.56 per cent.