France and Germany struggle to power European recovery

On Monday the Bank of France (BoF) revised up its estimate for fourth quarter GDP to 0.5 per cent. The BoF business confidence index also grew to 101 in November in the manufacturing sector. However, the index fell to 92 in the service sector, well below the historical average of 100.

Societe Generale suggest this points to a "sluggish" recovery in the fourth quarter. Household's consumption fell for the third consecutive month in October by -0.2 per cent. Services and construction surveys also point to a fragile French recovery.

On the positive side, manufacturing output is higher than the historical average. This led Societe Generale to forecast that industrial output will contribute to growth not just in the fourth quarter but also in the first quarter of 2014.

German data disappointed analysts with weak retail sales and poor factory orders. Industrial production also suffered a second consecutive monthly decline in October of -1.2 per cent.

The decline was driven by unexpectedly weak construction and manufacturing activity. The fall in the production of capital goods also bodes poorly for a recovery in investment. The data suggests that economic recovery remains fragile even in Europe's strongest economy.

Other analysts shared Societe Generale's doubts in Germany's ability to drive the Eurozone towards growth.

Jonathan Loynes, chief European economist at Capital Economics said:

Overall, the numbers put another dent in hopes that Germany will drive a further recovery in the euro-zone as a whole and maintain the pressure on the ECB to do more to boost growth across the currency union.