* Divergence between Germany and France widens
* PMIs point to Q4 growth of 0.2 pct
* Better growth reassuring, but recovery lopsided - Markit
By Jonathan Cable
LONDON, Dec 16 Euro zone businesses ended the
year on a high as new orders surged, but the chasm between a
resurgent Germany and wilting France has widened this month,
surveys showed on Monday.
Markit's Flash Eurozone Composite Purchasing Managers' Index
(PMI), which gauges business activity across thousands of
companies large and small, rose to 52.1 in December from 51.7
It was the second-highest reading since mid-2011 and beat
the median forecast in a Reuters poll for 51.9. The index has
been above the 50 mark that denotes growth for all the second
However, survey compiler Markit warned that while the
increase in growth was reassuring, the country-by-country
breakdown of the data revealed a lopsided recovery, with France
floundering and Germany steaming ahead.
"The rebound in the euro zone composite PMI in December
makes for encouraging reading and may serve to sooth concerns
about the sustainability of the recovery," said Martin van
Vliet, senior economist at ING.
"But we should not get too carried away either - the
still-low level of the overall index is a firm reminder that
this recovery is still very fragile and sluggish."
The division between the euro zone's two biggest economies
The French composite PMI fell to a seven-month low of 47.0
and signalled a steady contraction in activity, while the same
measure in Germany showed a solid expansion to 55.2.
Markit said the data suggested the euro zone economy, which
escaped from its longest-ever recession earlier this year, would
grow around 0.2 percent this quarter, in line with a Reuters
poll published last week.
New orders rose for the fifth month, suggesting the recovery
should continue into 2014.
German government bonds pared an early rise on Monday the
Markit's Eurozone Manufacturing PMI rose to 52.7 in December
from November's 51.6. That was its best showing in 31 months and
smashed median expectations for 51.9. It was higher than all
forecasts in a Reuters poll of 35 economists.
A gauge measuring manufacturing output soared to 54.8 from
53.1, a level not seen in more than 2-1/2 years.
As new orders for manufactured goods grew, factories were
able to build up a backlog of work at the fastest pace since
"This is very much a manufacturing-led recovery. It's
reflective of companies, especially in Germany, being more
competitive and taking advantage of the upturn in global trade,"
said Markit's Williamson.
The PMI for the services sector, which makes up the bulk of
the euro zone's economy, dipped to 51.0 from 51.2, confounding
expectations for a rise to 51.5.
Services firms were forced to cut prices again last month,
as they have done for the last two years, to drum up business.
Official data due on Tuesday is expected to confirm prices
rose across the 17 euro using nations by just 0.9 percent in
November - well below the European Central Bank's 2 percent
"We cannot rule out the possibility that the ECB will be
forced to take further action next year to tackle the ongoing
disinflationary pressures across the region," said ING's Martin
The ECB surprised markets last month by chopping its main
refinancing rate to a record low of 0.25 percent and while it is
not expected to cut them again, it may flood markets with
another round of cheap cash early next year.