The Eurozone Economy Continues To Recover, But It's Weak And Uneven

Overall, the eurozone economic story is a positive one.

The eurozone’s flash composite PMI climbed to a three-month high of 52.1 in December from 51.7 in November.

Any number above 50 signals growth.

The manufacturing PMI and manufacturing PMI output indices both climbed to 31-month highs.

Here’s Markit’s Chris Williamson:

“The rise in the PMI after two successive monthly falls is a big relief and puts the recovery back on track. The upturn means that, over the final quarter, businesses saw the strongest growth since the first half of 2011, and have now enjoyed two consecutive quarters of growth.”

“On the downside, the PMI is signalling a mere 0.2% expansion of GDP in the fourth quarter, suggesting the recovery remains both weak and fragile.

“The upturn is also uneven. Growth is concentrated in manufacturing, where rising exports have helped push growth of the sector to the fastest for two-and-a-half years, while weak domestic demand led to a further slowing in service sector growth.

“However, it‟s the unbalanced nature of the upturn among member states that is the most worrying. France looks increasingly like the new “sick man of Europe”, as a second successive monthly contraction may translate into another quarterly decline in GDP, pushing the country back into a technical recession. In contrast, the December survey data round off a solid quarter of growth in Germany, in which GDP looks set to rise by 0.5%.

“There‟s little here to suggest that euro area policymakers need to increase their stimulus, but on the other hand the sluggish nature of the upturn adds to the sense that policy will remain ultra-accommodative for quite some time.”

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