Euro zone business activity expanded at its weakest rate since the start of 2015 this month as growth paths diverged. But on the plus side, there was an unexpected surge from France. David Pollard reports.
Record employment levels mean Germany's workers are clocking up the hours. But is Germany clocking up the sales? Private sector growth slowed to a 16-month low this month. Manufacturing accelerating - but the services that make up more than two-thirds of its economy near stagnant. Overall, euro zone business activity expanded at its weakest rate in nearly two years. The PMI reading slipping backwards - though a reading above 50 still denotes growth. (52.6) (SOUNDBITE) (English) BGC PARTNERS MARKET STRATEGIST, MIKE INGRAM, SAYING: "They are looking pretty soggy .... That composite number by my reckoning the lowest data point since January 2015 and I have been suggesting for some times in terms of the overall growth coming out of the euro zone we've probably seen it as good as it gets." But unexpectedly, France showed its best performance in 15 months. Even as separate data showed its economy shrank in the second quarter - for the first time in nearly three years. (SOUNDBITE) (English) BGC PARTNERS MARKET STRATEGIST, MIKE INGRAM, SAYING: "It's been looking less bad, we have to say, over the past three or four months. But even that better manufacturing number that we saw today, 49.5, we're still in contractionary territory. A lot of the consumer support that we've seen in France is really contingent on some, shall we say, quite socialist working practices which economists would like to see dismantled which is likely to impact consumer confidence." The other PMI surprise came from Asia. Japan's manufacturing expanded for the first time in seven months. But for Europe - and critically its central bank - these figures may prompt a reckoning. Negative rates and a massive programme of QE asset purchases doing little to revive growth - even less to spur inflation. And just today, the ECB warning that its rates were near as low as they can go - in any case.