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Eurozone growth loses some momentum

24. August 2010. | 08:10

Source: MIA

The eurozone's rapid growth spurt lost some momentum in August with a robust performance by Germany failing to make up for a weaker pace of expansion in France and near stagnation elsewhere in the 16-country region, media reports say on Monday.

The eurozone's rapid growth spurt lost some momentum in August with a robust performance by Germany failing to make up for a weaker pace of expansion in France and near stagnation elsewhere in the 16-country region, media reports say on Monday.

Purchasing managers' indices pointed to a still-solid pace of expansion in private sector activity, suggesting growth is remaining buoyant in the third quarter of this year. However, they showed prospects hanging largely on the fates of Germany and France, the region’s two largest economies.

- Growth in the rest of the euro area slowed to near stagnation, and services even contracted again as austerity measures bit, said Chris Williamson, chief economist at Markit, which produces the survey.

The eurozone expanded rapidly in the three months to June, when gross domestic product rose by 1 per cent compared with the previous quarter, powered by a dramatic 2.2 per cent expansion in Germany, the region's largest economy.

With the purchasing managers' indices regarded as providing indicator of likely trends in coming months, the latest readings will boost hopes of growth continuing at a brisk pace, even if the US economy slows.

But they will intensify worries about eurozone divergences, with the region's prospects marred by weak growth in southern European countries such as Spain and Greece – where fears remain over the stability of their public finances.

The composite eurozone index, covering manufacturing and service sectors, fell from 56.7 in July to 56.1 in August, a two-month low. With a figure above 50 indicating an expansion in activity, that represented the 13th consecutive month of growth. Markit said August's figure was consistent with GDP expanding at a quarterly rate of 0.7 per cent.

Germany continued to push ahead of other eurozone countries. Its composite index rose to a four-month high of 59.3, up from 59.0 in July. In a significant development, the improvement resulted from a pick-up in activity in the service sector – which was expanding at the fastest pace in three years.

That pointed to a broadening of the country’s economic recovery, which has been led by engineering exports, especially to China. That could help it withstand a global slowdown.

In contrast, France's composite index dipped from 59.7 in July to 59.0 in August, the lowest for five months. But Markit argued that the survey still pointed to a robust recovery continuing, with manufacturing and service companies reporting stronger increases in new work and private-sector employment rising for the fourth month running.


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