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Data Points to Eurozone Recovery Losing Steam

Dec. 4, 2013
HSBC bank analyst Matteo Caminetta said the eurozone's dependence on global trade for recovery was obvious.

PARIS - The eurozone recovery is losing steam, data released on Wednesday suggested, with France possibly heading back into recession.

Eurostat released its second estimate of the eurozone's third-quarter growth, which was unchanged at 0.1%.

That marks a slowdown from the 0.3% economic growth recorded in the second quarter when the eurozone escaped a record 18-month recession.

HSBC bank analyst Matteo Caminetta said the eurozone's dependence on global trade for recovery was obvious.

"As exports stalled in the third quarter, so did GDP (gross domestic product)," he wrote in a market comment.

Exports growth slowed from 2.1% in the second quarter to 0.2% in the third, while imports grew by 1% in the third quarter.

Economist James Howat at Capital Economics said "with imports rising faster than exports, net trade was a drag on growth."

More current data signaled a slowdown in the current quarter.

Recovery 'Slow and Uneven'

Eurostat also said on Wednesday that the volume of retail trade dipped by 0.2% in November from the previous month in seasonally-adjusted terms.

Forward-looking business survey data also released on Wednesday indicated the recovery is slow and uneven.

Markit said the final score for its composite eurozone Purchasing Managers' Index for November came in at 51.7, down from 51.9 points in October.

While it was the fifth month running with a reading above 50, which signals growth, November was the second month in a row that it has slowed.

However, the surveys of managers about their operations, which are a reliable indicator of GDP growth, painted a contrasting picture across the eurozone.

While Germany was at a 29-month high at 55.4 and Ireland hit a 5-month high at the same level, both Italy and France declined again.

Italy slid to a 5-month low of 48.8 and France hit a 5-month low of 48.0.

"The final PMI data confirm that the euro area's recovery lost some momentum in November," said Markit chief economist Chris Williamson.

He said that a similar result in December would put the eurozone on course to grow by 0.2% in the fourth quarter.

France: 'The Sick Man of Europe'

While data for Germany, Ireland and Spain was encouraging, Williamson expressed concern the "declines in the PMIs for Italy and France raise the prospect of these countries' economies contracting again in the fourth quarter."

That would mean France falling back into recession and a 10th quarter in a row of recession in Italy.

The French data also showed a drop in new orders and employment, with the cut in staffing levels the sharpest in seven months.

"The latest data highlight the risk of a further contraction in GDP during the fourth quarter, which would tip France back into recession," said Jack Kennedy, the author of the French PMI report.

Economists at Berenberg bank commented recently that "France is the sick man of Europe, just like Germany had been from 1993 until its reforms of 2004 and Britain in the dark, pre-Thatcher days."

They said that German reforms making the labor market more flexible were paying off with strong employment gains in real wages, while in France both are under pressure as it seeks to regain competitiveness.

Copyright Agence France-Presse, 2013

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