Eurozone recovery slows slightly

Monday 23 August 2010 17.02
Eurozone - Growth still depending on Germany and France
Eurozone - Growth still depending on Germany and France

The economic recovery in the 16-nation eurozone slightly lost momentum in August, with growth still depending on Germany and France.

The Purchasing Managers' Index, a survey of 4,500 euro area companies compiled by data and research group Markit, fell to 56.1 points from 56.7 points in July, when it had accelerated for the first time in three months.

'The reading was still consistent with a robust rate of expansion and combined manufacturing and service sector output has now risen for 13 consecutive months,' Markit said.

Any score above the 50-point line indicates economic growth, but Markit pointed to stark differences between eurozone nations.

There was 'little evidence' to suggest that 'buoyant business conditions' in core economies are spilling over to weaker ones amid stinging austerity measures to slash deficits, said Markit chief economist Chris Williamson.

Mr Williamson said: 'The recovery lost only slight momentum compared to the bumper growth seen in the second quarter, with the flash Eurozone PMI for August consistent with gross domestic product for the region growing at a quarterly rate of 0.7%.

'However, the robust headline number masks some worrying developments.

'Of greatest concern, the upturn continued to be all too dependent upon France and Germany.

'Growth in the rest of the euro area slowed to near stagnation, and services even contracted again as austerity measures bite.'

The rest of Markit's data showed a drop in the manufacturing index to 55 points from 56.7 points in July, its lowest level in six months.

The services index fell slightly to 55.6 points from 55.8 points the month before.

Earlier this month, Germany posted its best quarterly performance since reunification with 2.2% growth between April and June, driving the eurozone economy to 1.0% growth, above a forecast of 0.7%.