Eurozone survey points to pick-up despite France

Fears that the recovery in the 17-country eurozone has stalled eased today after a survey showed business sentiment across the region rising for the first time in three months despite renewed weakness in the French economy.
The monthly composite purchasing managers' index, known as PMI, for the eurozone from financial information company Markit rose to a three-month high of 52.1 in December from 51.7 in November. The increase took the index, where anything about 50 indicates expansion, close to the 27-month peak seen in September.
Chris Williamson, Markit's chief economist, said today the rise is a "big relief and puts the recovery back on track." The rise, he added, means that over the final quarter of the year, businesses saw their strongest growth since the first half of 2011, just before the eurozone slipped back into its longest-ever recession amid widespread debt problems among the 17 European Union countries that use the euro.

Since the recession ended, the eurozone has grown for two straight quarters but the recovery has been unspectacular in the third quarter the eurozone only grew by 0.1 per cent from the previous three-month period. That corresponds to an annualised rate of around 0.4 perc ent, way down on the US's 3.6 per cent.
Though Markit thinks the fourth quarter may see the rate of growth double, its headline index masks worrying developments, particularly over the state of France, which saw its PMI fall to a seven-month low of 47.0 in December from 48.0 the previous month.
Williamson said Europe's second-largest economy could fall back into recession following its 0.1 per cent quarterly contraction in the third quarter. A recession is commonly defined as two straight quarters of negative growth.

"It's the unbalanced nature of the upturn among member states that is the most worrying," said Williamson. "France looks increasingly like the 'new sick man of Europe.'"
Overall, the survey may ease the immediate pressure on the European Central Bank to do more to shore up the recovery despite below-target inflation and ongoing budget restraints in a number of economies, such as Greece, Spain and Italy.