Germany is pulling Europe higher while France stumbles

Germany is still the engine of Europe, while France is stumbling.

It’s PMI day in Europe, meaning we’re getting a snapshot of growth across the continent.

Purchasing managers’ index from Markit give an indication of whether sectors are growing or contracting. They’re shown by a number between 0 and 100, with anything above 50 signalling growth — the higher the better — and below meaning contraction.

On Wednesday, we got PMI readings for a raft of countries’ service sectors in December and early PMI figures for overall economic growth in France, Germany, and Europe as a whole.

Europe is doing well, beating growth forecasts for both its service sector and the economy. That’s largely down to Germany, which beat forecasts by a long way in its service sector and saw overall economic growth accelerate in December, which is normally a quiet month.

Italy is also lending a helping hand — its service sector grew much faster than expected and its manufacturing industry is also faring much better than economists thought.

But France is stumbling. The country’s service sector slipped into contraction in December for the first time in a year and the overall economy is perilously close to shrinking — growth was at 50.1, down from 50.3 in November. That’s more or less anemic.

You have to factor in the impact of the Paris shootings in November and the subsequent security crackdown, which would have affected growth particularly in the service sector which includes tourist-dependent businesses like restaurants and bars.

But there are other signs of more systematic economic difficulties — unemployment hit 10.6% in December, for instance.

Here’s the full rundown of the PMIs we got today:

  • Spain: Big miss — 55.1, against a forecast of 56.4 and down from November’s figure of 56.7.
  • Italy: Big beat — 55.3, against a forecast of 53.6 and up from November’s figure of 53.4.
  • French services: Miss 49.8, against a forecast of 50, flat on November’s figure.
  • French economy: 50.1, down from 50.3 in November.
  • German services: Big beat — 56, against a forecast of 55.4, flat on November.
  • German economy: 55.5, up from 54.9 in November.
  • Eurozone services: Big beat — 54.2, against a forecast of 53.9, flat on November’s figure.
  • Eurozone economy: Beat — 54.3, against a forecast of 54, flat on the prior month.
  • Britain: Miss — 55.5, against a forecast of 55.6, down from 55.9 in November.

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