Jonathan Cable London
The fledgling recovery among euro zone factories stumbled slightly last month, held back particularly by the economic laggards on the bloc’s southern fringe, surveys showed yesterday.
Manufacturing growth in Italy and Spain, the euro zone’s third- and fourth-biggest economies, eased off last month, suggesting economic recovery there remains fragile. Battered Greece’s contraction deepened.
In France, the bloc’s second-biggest economy, factories edged closer to pulling out of a 19-month slump but activity was still contracting.
Germany, Europe’s largest economy, grew but the pace eased slightly from August. It was the result, some analysts said, of weakness to its south.
“Italy disappointed, Spain ditto. Germany has been caught in the backwash… so no real improvement – it’s pretty much ‘as you were’,” said Peter Dixon at Commerzbank.
“There were some positive signs but we need more information before we can say that this definitely marks a turning point,” he added.
Irish factories chalked up their fastest pace of growth in 14 months while Dutch output hit a 29-month high.
Italy is struggling to emerge from its longest post-war recession and is again in political trouble, with Prime Minister Enrico Letta battling to stay in office after centre-right leader Silvio Berlusconi withdrew his party’s five ministers from the government.
Spain returned to growth for the first time in two years in the third quarter, the government said last week, but its unemployment rate remains one of the worst in the euro zone, rivalled only by Greece.
Euro zone unemployment held flat at 12 percent in August after easing in July and EU policymakers have made job creation their top priority for restoring sound growth. But in Spain and Greece unemployment is still above 25 percent.
“It’s indicative of an economy which is climbing out of a deep hole,” Dixon said on the euro zone as a whole. “If that can be sustained, then wonderful, but I think it is too early to talk about a significant turnaround in the labour market.”
The euro hit an eight-month high against the dollar yesterday after US legislators failed to agree on a compromise bill to fund operations, making Europe’s exports more expensive and thus less attractive.
Across the channel and outside of the currency union, growth in Britain’s manufacturing sector eased slightly in September from a two-year high the month before.
And in China, manufacturing activity grew only slightly last month, raising concerns that a nascent economic recovery may be foundering.
The euro zone manufacturing purchasing managers’ index (PMI), for which data company Markit polls thousands of manufacturing companies, dipped to 51.1 in September from August’s 26-month high of 51.4, in line with an earlier flash estimate. A reading above 50 indicates growth.
An index measuring output, which feeds into the wider composite PMI due tomorrow and seen as an indicator of growth, eased to 52.2 from August’s 27-month high of 53.4, just above the flash estimate of 52.1. – Reuters