Revival by France Fuels Common Currency Zone

An unexpected French revival of its economy might have been a big help to the eurozone in avoiding more slowdown during the three-month period ending at the start of September, showed surveys from purchasing managers at service providers and manufacturers in the common currency zone.

However, Germany, the largest economy, continued to slow down which showed there was little sign of an acceleration in the anemic recovery that would be necessary for the European Central Bank to reach its target for inflation over the upcoming years.

Nevertheless, the surveys found that companies increased their prices for just the first time in more than a year.

An extended period of strikes due to new labor laws created shortages of fuel and hurt transportation in France during the three month period to June, which contributed to a decline in the output of the economy.

However, without those problems, the manager’s surveys showed that the second largest eurozone economy bounced back during the third quarter.

The activity in the private sector of France, based upon the surveys referred to as the Purchasing Managers Index increased to 53.3 as of September from August’s 51.9 to reach the highest level it has been since June of 2015 and its joint highest mark since August of 2011.

This revival was driven by the country’s service providers who reported an increase in the number of new orders, which suggests the rate of growth is picking up and might be sustained during the upcoming months.

Manufacturer’s activity continued to fall, but at a pace that slowed. In another survey released this week, by Insee a statistics agency showed a sharp increase in the production outlook of business leaders.

The economy of the eurozone rarely has been lifted at the same time by the top four member economies over the past four years since growth returned. While this most recent quarter has seen a turnaround in the fortunes of France, Germany has continued to lose steam.

Germany’s PMI composite dropped from 53.3 to 52.7 for the quarter to hit a low of 16 months. In a reversal seen across France, manufacturers reliant on exports continued thriving, while the country’s service providers that are more dependent upon the domestic market has struggled.

August was the first month in the past four years in which the measure in France exceeded Germany. The mixed fortunes left the economy of the eurozone overall stuck in a rut of low growth, with its PMI composite dropping from 52.9 to 52.6 for August.

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