France lags as recovery in euro zone picks up

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Investing.com - Private sector activity in the euro zone rose in December, data on Monday showed, indicating stronger growth in the euro area, but the rate of decline in France accelerated, raising concerns that the country could fall back into a recession.

The euro zone's composite output index rose to a three month high of 52.1 in December, from 51.7 in November, indicating that European Central Bank policymakers will not need to step up stimulus measures. It was the fastest increase since April 2011.

New orders picked up to the highest level since mid-2011, fuelling optimism that the recovery in the region will carry forward into the start of 2014.

Rising exports helped push the euro zone's manufacturing purchasing managers' index up to a 31 month high of 52.7 in December, from a final reading of 51.6 in November and above expectations for a reading of 51.9.

However, the rate of expansion in the service sector ticked down to a four month low as domestic demand remained weak. The euro zone services PMI declined to 51.0 from 51.2 in November. Economists had expected an increase to 51.5.

The report said the PMI is signaling gross domestic product expansion of just 0.2% in the fourth quarter, indicating that the recovery in the euro area remains fragile.

Private sector output in the euro zone's largest economy continued to expand steadily in December, with Germany's manufacturing PMI rising to a 30-month high of 54.2 from 52.7 in November, well above expectations for a reading of 53.0.

Germany's service sector expanded at slightly slower pace this month, with the services PMI ticking down to 54.0 from 55.7 in November, compared to expectations for a decline to 55.5.

A separate report showed that the contraction in France's manufacturing and service sector deepened in December.

France's manufacturing PMI fell to a seven month low of 47.1 from 48.4 in November, while the services PMI dropped to a six month low of 47.4 from 48.0 last month.

The weak data raised concerns that the French economy could post a second successive quarterly decline in the three months to December, after a contraction of 0.1% in the third quarter, which would push the country back into a recession.




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