French malaise hits growth in the struggling eurozone

The eurozone's "uneven and fragile" recovery was underlined yesterday as the region's private-sector companies stuttered in February, a new survey warned.

Financial-data provider Markit's latest snapshot of activity among manufacturing and services firms, where a score over 50 signals growth, remains in expansion territory but surprisingly slowed from 52.9 to 52.7.

Despite strong German growth, the main culprit for the slowdown was renewed malaise in France, where firms reported a fourth-successive monthly slide in activity and new orders falling at an even faster rate than the previous month. Analysts said the signs of weakness kept further rate cuts on the table at the European Central Bank, where President Mario Draghi is battling the threat of deflation.

Markit's surveys suggest growth of 0.5 per cent for the eurozone in the current quarter, accelerating from the 0.3 per cent seen at the end of last year and the strongest pace for three years.

The periphery nations – Italy, Spain, Ireland, Greece and Portugal – are on course for their strongest growth since 2011 although France is in danger of slipping back into contraction territory, according to chief economist Chris Williamson.

"A dip in the eurozone PMI (purchasing managers' index) provides a reminder that the region's recovery continues to be uneven and fragile," he said. "Unemployment looks set to remain a worry, as companies report ongoing pressure to keep headcounts down to reduce costs and boost competitiveness."

ING Bank economist Martin van Vliet said expectations of further policy easing in Frankfurt were kept "firmly alive" by the latest figures.

Inflation is still well below Frankfurt's target of just under 2 per cent at a worrying 0.7 per cent, while growth will be held back by a relatively strong euro, he said.

"With inflation low and a sustained eurozone recovery not yet assured, a further small cut might still be on the cards, but perhaps not as soon as March," Mr van Vliet added.

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