Germany and France drive Euro recovery

Julian Harris
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SPLITS in the Eurozone recovery were evident yesterday, as economic data showed strength in Germany and France despite ongoing slumps in troubled Mediterranean and peripheral states.

The service sectors actually contracted in Spain and Ireland last month, and effectively stagnated in Italy.

However, service industries continued to grow in France and Germany, the purchasing managers’ index (PMI) showed.

In Germany the rate of growth accelerated to 59.2 in the PMI index, from 58.3 in November. All figures over 50 indicate growth.

The sector grew in the Eurozone as a whole to 54.2 in the PMI index with employment rising for the eighth consecutive month. Germany experienced the fastest rate of jobs growth.

Backlogs of work also rose in the Euro area for the second month running, boosting optimism for the sector in the opening months of 2011.

Spain’s service sector business activity dropped to a 46.2 rating from 48.3, while Ireland’s fell to 47.4 – its weakest level since January 2009.

Meanwhile industrial orders for October were also down in Spain by 0.3 per cent and Italy by 1.4 per cent, despite rising by 1.4 per cent across the Eurozone as a whole.

Month to month industrial orders can be volatile, yet the Eurozone is on an upward trend, according to Howard Archer of IHS Global Insight.

“The underlying strength of industrial orders was evident in the fact that they rose by 2.4 per cent in the three months to October compared to the three months to July,” he said.

New orders rose in Germany by 1.4 per cent and France by 2.3 per cent, as the news mirrored extremely strong manufacturing results from earlier in the week.

Monday’s manufacturing PMI and yesterday’s services PMI both showed a rise in input prices, reflecting global commodity price inflation. However, output prices in services rose at more modest rate, as companies looked to absorb the pressures.

And Eurozone inflation was also reflected in producer price index (PPI) figures released yesterday.

Euro area November PPI rose by 0.3 per cent on the previous month, an annual rise of 4.5 per cent.