21st Sep 2021

Germany and France lead way in 'two-speed recovery'

The economic recovery of the eurozone slightly lost its momentum in August, with most of the growth dependent on the performance of Germany and France, a purchasing managers' index survey published on Monday (23 August) showed.

According to the preliminary figures from Markit, a UK-based research firm, the eurozone composite output index, which measures activity across the private sector, including the manufacturing and services sectors, fell to a two-month low of 56.1 in August, down from 56.7 in July.

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  • The German and French leaders: the two countries' economies are leading the eurozone (Photo: The Council of the EU)

While the outcome of the whole single currency bloc is "solid," Markit wrote in a press release, there are "worrying divergences" between national economies, as growth is largely dependent on Germany and France.

"Growth in the rest of the euro area slowed to near stagnation, and services even contracted again as austerity measures bite," Chris Williamson, the company's chief economist said.

There is little evidence to suggest that buoyant business conditions from France and Germany "are spilling over to the benefit of the periphery," he added, noting that this could spell further divergence in the euro area's "two-speed recovery."

The German composite purchasing managers' index, which rose to 59.3 in August, up from 59 in July, was boosted by an acceleration in the services sector. The services activity index rose to its 36- month maximum at 58.5, up from 56,5 in July. The manufacturing index reached its two-month low at 60.9 in August, compared with 63.6 in July,

France's composite index fell to 59 from 59.7 in July, but Markit said a recovery is still on the way.

"Although the headline composite activity index fell to its lowest level since March, stronger rises in both new business and backlogs offer reassurance that the recovery in France remains robust," Markit economist Jack Kennedy was quoted as saying.

Flash estimates from the EU statistic office Eurostat, published on 13 August, confirmed Germany as a leader of Europe's economic recovery with a GDP growth rate of 2.2 percent in the second quarter of 2010, the best German result since re-unification in 1990.

France's GDP increased by 0.6 percent, while Spain, Italy and Portugal each reported increases of less than 0.5 percent. The EU's overall growth was 1.7 percent.

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