France drags on slow euro zone recovery

Mon Nov 4, 2013 7:01am EST
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By Jonathan Cable

LONDON (Reuters) - The euro zone economic recovery that began in Germany has spread to some smaller members but shrinking French manufacturing is hampering a more robust rebound.

Business surveys released on Monday showed factory production in the 17-nation bloc accelerated as expected in October, getting close to August's 26-month high, but still weak compared with historical levels.

Markit's final Manufacturing Purchasing Managers' Index (PMI) rose to 51.3 in October from 51.1, in line with an earlier flash reading and with the consensus forecast of economists. It hit a 26-month high of 51.4 in August.

But Germany and France, the bloc's two biggest economies, went in opposite directions.

Germany showed activity picked up last month, with its index rising to 51.7 from 51.1. In France manufacturing activity shrank to 49.1, its 20th month below the 50 market that divides growth and contraction.

Trouble spots Spain and Italy also diverged, with both growing but the latter at a slower pace than previously.

The lack of substantial growth overall, and with prices barely rising last month, has heightened some expectations the European Central Bank will cut interest rates from already record lows when it meets later this week.

An index measuring output, which feeds into a composite PMI due on Wednesday that provides a good indicator of overall growth, rose to 52.9 from 52.2.   Continued...

Employees stand in front of a new car at the Maserati new opening plant in Turin, January 30, 2013. REUTERS/Stefano Rellandini