Euro area manufacturing contracts

Euro zone manufacturing activity appeared no closer to recovery last month, when a dire performance in France offset a return to growth in Germany, a business survey showed today.

Manufacturers helped lift the 17-nation bloc out of the last recession, but purchasing managers' surveys showed activity in France, the euro zone's second-biggest economy, has now contracted for a year.

In contrast, German manufacturing expanded for the first time since February last year, joining Ireland as the only countries surveyed in the bloc to show growth in manufacturing activity.

"The concern is that manufacturing trends are diverging strongly within the euro zone," said Chris Williamson, chief economist at data collator Markit.

"But some consolation can be gained from the fact that January's reading was the highest for 11 months, suggesting that the manufacturing downturn has eased so far this year compared to the pace of decline seen throughout much of last year."

Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) remained at January's 47.9 last month, just pipping an earlier flash reading of 47.8 but holding below the 50 level that divides growth from contraction for the 19th month running.

The output index, which feeds into the Composite PMI, a broader gauge of the economy due out on Tuesday, sank to 47.8 from January's 48.7.

Having contracted 0.6 per cent at the end of 2012, chalking up its third negative quarter, the bloc's economy will probably stagnate in the current period and only see tepid growth from here, a Reuters poll published last month suggested.

Still, an index of new export orders, which can provide a guide to future activity and includes purchases from within the bloc, jumped to 51.7 in February from 49.5 - its first time above 50 since June 2011.

Earlier PMIs from Spain and Italy showed activity in their manufacturing sectors deteriorated again with the situation worsening in Italy.

Germany's PMI bounced to 50.3 from January's 49.8, while France's reading came in at 43.9, above the previous month's 42.9 but well below the 50 mark for the 12th month.

In Britain, a shock fall in manufacturing activity fuelled fears that Britain is heading for a triple-dip recession.

The latest Markit/CIPS purchasing managers' index for Britain revealed that overall activity contracted as output fell, with a headline reading of 47.9 in February. The index slipped into the red for the first time since last November as the UK continued to be battered by poor weather and manufacturers suffered tough conditions both at home and abroad.

Reuters/PA