Positive manufacturing numbers bring little cheer to Eurozone GDP

Unfortunately, the modest rise in Eurozone purchasing managers' index (PMI) doesn't do much to change to view that GDP growth in the region is likely to have been weak in the fourth quarter.

The headline index rose from 51.7 to 52.1, its highest level since May 2011.

But a third consecutive monthly decline in the services index does not, says Ben May of Capital Economics, bode well for domestic demand prospects in the region.

May points out that, although the index averaged 51.9 over the fourth quarter as a whole, which is higher than the third quarter's outturn, this means that GDP may have only increased 0.2 per cent from the third quarter's unimpressive gain of 0.1 per cent.

When it comes to the (limited) country breakdowns, Germany clearly led the way, with its manufacturing PMI climbing to 54.2 in December, its highest since mid-2011. Services fell slightly to 54.0 but this, says Berenberg's Christian Schulz, shows it "remains in strongly expansionary territory, so that strong domestic demand is combining with an improving outlook for exports to boost growth."

But things weren't looking so good for France, as its series of disappointing numbers continued.

The fall in the country's manufacturing index to 47.1 in December leaves it pointing to a second consecutive quarterly drop in fourth quarter GDP. Both manufacturing and services contracted for a second month running, and at the fastest rate for seven months, after the GDP contraction of 0.1 per cent in the third quarter.

This, says Howard Archer of IHS Global Insight, "suggests that there is a very real danger that France is slipping back into shallow recession and reinforces concern about France’s underlying competitiveness."

Schulz says that, fortunately, "the crisis countries seem to be following Germany’s upward drag more than France’s downward pull" - reflected in the composite manufacturing PMI result.

But despite new-found competitiveness enabling countries like Spain and Italy to come out of recession through increasing exports, today's numbers serve as further evidence that the Eurozone economy continued its doddery pace of growth towards the end of 2013.