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Germany's Economy Marches Ahead While France's Struggles to Stay Above Water


[Editor’s note: The following is a crosspost by Holly Ellyatt that originally appeared on]:

Business activity in the euro zone's largest and second-largest economies continues to move in opposite directions, according to the latest surveys on manufacturing and the services industry in the countries.

France's socialist president Francois Hollande and German Chancellor Angela Merkel (Getty Images)

Germany's private sector expanded for the eight consecutive month in December, flash composite purchasing manager's index (PMI) figures released by Markit on Monday showed.

Composite PMI data stood at 55.2 in December, slightly down from November's final reading of 55.4 but continuing a trend of robust business activity in the euro zone's largest economy.

Output growth in the manufacturing sector was at its strongest since May 2011, Markit said, as Germany reported a manufacturing PMI of 54.2, above November's final reading of 52.7 and beating analysts' forecasts.

The services PMI, meanwhile, stood at 54.0 in December, also a slight drop from November's final reading of 55.7 and below a forecast of 55.5. The 50-point mark separates expansion from contraction in business activity.

Adding to economic optimism over Germany, the country's central bank said in its monthly report published on Monday that it expects industrial production and consumer and business sentiment to continue to grow.

"Despite a cautious start to the final quarter (of the year), it can be expected that the German economy will expand strongly in the winter half year 2013/2014," the Bundesbank said.

The data comes as the euro zone as a whole also showed an expansion of business activity, ending a turbulent year on a high note.

Flash composite PMI data for the 17-strong bloc showed stood at 52.1 in December, above the 51.7 figure seen in November and above a forecast of 51.9 from analysts polled by Reuters.

Tim Moore, senior economist at Markit said the Germany's manufacturing sector had achieved a particularly strong end to the year "with improving new order flows and renewed job creation also providing encouragement that the sector has gained momentum since the autumn."

The German figures followed French data which painted a less rosy picture.

French business activity fell to a seven-month low in December, coming in below analysts forecasts.

Flash composite purchasing manager's index (PMI) figures showed that business activity fell to 47.0 in December, below November's final reading of 48.0.

Services activity in the euro zone's second-largest economy fell to a six-month low of 47.4 in December, versus expectations of 49.0 and below November's figure of 48.0 . Likewise, manufacturing activity in France fell to a seven-month low of 47.1 in the same month, below November's reading of 48.4. The figure again failed to hit analysts' forecasts of 49.1.

The latest data underscores France's economic vulnerability, Markit's senior economist Andrew Harker said.

"The last flash PMI readings for 2013 paint a worrying picture on the health of the French economy," he said in a note.

"The return to contraction in November has been followed up with a sharper reduction in December, with falling new business at the heart of this as clients were reportedly reluctant to commit to new contracts. Firms will hope that such reticence ends in the new year as they seek to avoid another protracted downturn."



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