French gloom drags on euro area economy

Ben Southwood
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A FOUR year low in activity across the French economy combined with sluggish growth in Germany served to pull the Eurozone deeper into contraction in March, figures showed yesterday.

And the gloom was not confined to the bloc’s two biggest economies, with Spain and Ireland both seeing a fall in their purchasing managers’ index (PMI), a widely-regarded business survey.

France’s PMI plunged from 43.1 in February to 41.9 in March, according to numbers from Markit, a 48-month low and signalling even faster contraction, since it is below the crucial no change level of 50.

And Germany also saw its PMI drop sharply, from February’s 53.3 – which suggested healthy growth – to 50.6, only inches away from being completely flat.

Together with falls in smaller Spain and Ireland, this brought the overall Eurozone index from 47.9 in February to 46.5 in March – a sharper contraction despite claims from a swathe of top EU officials that the bloc had passed through the worst of the crisis.

“Deeper services contraction in March reinforces the belief that the Eurozone suffered a sixth successive quarter of GDP contraction in the first three months of 2013, with a drop of around 0.2 to 0.3 per cent quarter-on-quarter looking possible,” said IHS Global Insights’ Howard Archer.

“With the corresponding manufacturing PMI also showing deeper contraction and business confidence across the Eurozone relapsing during the month, there are worrying signs that matters are deteriorating anew,” Archer warned.

Meanwhile the world economy expanded for the 44th straight month, according to a separate release from Markit and JP Morgan, also released yesterday.

The global all-industry output index picked up from 52.9 to 53.1, the research showed, with manufacturing in its fifth successive month of growth, and services continuing the run of expansion it has consistently enjoyed every month since August 2009.