Powerhouse Germany still driving Euro

Julian Harris
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RECOVERY in the Eurozone is continuing despite troubles in peripheral economies, data revealed yesterday.

Business activity hit a six month high, according to Markit’s purchasing managers’ index, exceeding forecasts.

The service industry’s expansion accelerated this month, while manufacturing growth slowed – to an index score of 56.9, down from 57.1 in December.

The service sector in the Euro area increased from 54.2 to 55.2.

All scores over 50 indicate economic growth.

Yet the single currency area is still largely being driven forward by France and Germany, its core economies.

“The German composite output index continued to defy gravity, rising from 60.3 to 61,” noted ING’s Martin van Vliet.

“The score signalled the strongest private sector growth performance since the record high posted in June 2006.”

French business activity also increased, from 56.3 to 56.9, a four month high.

The Eurozone is increasingly experiencing a “two speed” recovery, Markit revealed.

“The divergence between Germany and the rest of the single currency area has reached a new high,” said chief economist Chris Williamson.

“Outside of France and Germany the periphery has now seen new orders fall in four of the past five months,” he said.

The story was mirrored by separate data on industrial orders, released later in the day.

“German industrial orders surged in November, maintaining its position as the manufacturing powerhouse of the Eurozone,” said Howard Archer of IHS Global Insight.

“There as also decent growth in orders in France and, encouragingly, Spain. However, orders fell in Italy.”

Industrial orders across the whole of the Eurozone rose by 2.1 per cent in November, compared to the previous month.

The divergence in economic performance between difference areas in the Euro area “increasingly complicates the ECB’s task in setting interest rates,” van Vliet said.