French troubles could extend Eurozone crisis

Ben Southwood
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EUROZONE business activity sunk further and at a faster pace in February, as the bloc proved unable to escape from its lengthy crisis.

Markit’s purchasing managers’ index (PMI) for the currency zone slipped back to 47.3 in the second month of 2013, having risen to 48.6 during January. Since this is further below 50, which indicates no change in business activity, it suggests output falling at an even faster rate.

“A steepening rate of decline in February is a disappointment, and suggests that the Eurozone is on course to contract for a fourth consecutive quarter in the first three months of the year,” said Markit chief economist Chris Williamson.

Beneath the headline figures there was a sharp divergence between the bloc’s largest two economies, Germany and France.

French private sector output was in freefall in February, according to its PMI of 42.3 ­– a 47-month low – down from 42.7 last month.

By contrast Germany enjoyed continued expansion – though at a slower rate. It posted a PMI of 52.7, some 10 points higher than France, and indicating expansion, albeit at a slower rate compared to January’s 54.4.

“Digging into the data shows increasing schisms within the Eurozone,” Williamson added.

“National divergences between France and Germany have widened so far this year to the worst seen since the survey began in 1998.”

And businesses in France and Germany expect this stark divergence to go on. German services firms recorded a 20-month high in optimism for the coming year, while French business confidence was at a three-month low.