Business recovery eases as euro zone split deepens

Wednesday 04 December 2013 10.46
Markit's November euro zone Composite Purchasing Managers' Index slipped to 51.7 from 51.9 in October
Markit's November euro zone Composite Purchasing Managers' Index slipped to 51.7 from 51.9 in October

The recovery in the euro zone private sector lost momentum in November, according to a survey today.

The data again highlighted the growing disparity between some of the bloc's biggest economies.

Markit's November euro zone Composite Purchasing Managers' Index, which monitors activity at thousands of firms across both the services and manufacturing industries, slipped to 51.7 from 51.9 in October.

But was still an improvement on an initial estimate of 51.5 and was the index's fifth month above the 50 mark that divides growth from contraction in a row.

"The final PMI data confirm that the euro area's recovery lost some momentum in November. It's clearly a concern that the rate of growth remains so fragile," said Chris Williamson, chief economist at data collator Markit.

A purchasing managers' index covering the region's dominant services industry fell to 51.2 from 51.6, although that was an improvement on the 50.9 flash reading.

The euro zone as a whole escaped from its longest recession earlier this year, supported by stronger than expected growth in Germany. But a Reuters poll last month suggested it would grow a paltry 0.2% this quarter.

Williamson said the PMIs pointed to the same rate of growth but warned that readings from France raised the possibility that the country would slide back into recession. The Italy PMI suggested that its downturn would extend into a 10th quarter.

The French composite PMI slumped to 48 and has only managed two readings above 50 in the last 21 months. Italy's services PMI similarly tumbled back below the break-even mark to 47.2 from 50.5 in October.

Germany's composite PMI, however, jumped to a 29-month high of 55.4 as firms took on more staff to meet the orders flooding in. Spain's service index bounced back comfortably above 50.

The signs of a growing divergence will complicate the debate at the European Central Bank when it meets to set policy tomorrow. Last month it unexpectedly cut its key interest rate to a record low of 0.25% after inflation fell close to a four-year low of 0.7% in October.

While inflation picked up to 0.9% last month, that is still well below the ECB's 2% target ceiling, and the PMI data suggested firms are still cutting prices to drum up business. The euro zone services output price index fell to 47.9 from 48.5.

That could go some way to explaining why new orders came in at a rate matching September's 27-month high. The composite new orders subindex rose to 51.8 from October's 51.4, today's figures showed.