France drags on euro zone economy, Britain brighter

Thu Apr 4, 2013 7:35am EDT
 
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By Andy Bruce

LONDON (Reuters) - A huge drop in French business activity meant the euro zone's recession dragged on in March but British services firms provided a rare glimpse of economic sunshine, posting their best month since August.

Business surveys on Thursday showed the decline in French services businesses is now at its steepest since the nadir of the 2008-09 recession, outstripping even the downturns of struggling Spain and Italy.

In Germany, the region's biggest and most resilient economy, growth slowed to a near-stall last month.

Unusually, Britain bucked the trend after rising new orders helped services companies like banks, hotels and restaurants record their fastest growth since last summer's London Olympics.

Overall though, the latest batch of purchasing managers indexes (PMIs) showed most of Europe's major economies, at least in the euro zone, fared poorly in the first quarter of the year.

"With these PMI readings, we're likely to be in contraction territory even for the second quarter," said Juergen Michels, lead euro area economist at Citi in London.

Despite the clear economic weakness, economists do not expect the European Central Bank to announce any major easing of monetary policy this Thursday.

But the accumulation of dismal data could prompt a more dovish tone from ECB President Mario Draghi, who in January identified "positive contagion" sweeping through financial markets as a result of his policies.   Continued...

 
The Euro sculpture is pictured in front of the headquarters of the European Central Bank (ECB) in Frankfurt January 24, 2012. REUTERS/Lmar Niazman