France has the second largest economy within the Eurozone, behind Germany, but whilst the German economy has recovered strongly (in relative terms) the French economy spent much of 2013 going backwards. However, the latest Markit composite (multi sector) Purchasing Manager’s Index (PMI) for March suggests that things are improving.
The PMI provides a yardstick to judge if an economy (or a sector) is expanding or contracting. A value below 50 suggests that the sector being referred to is contracting whilst values above 50 indicate that the sector is expanding. The February PMI value came in at 47.9, suggesting that business output was continuing to fall, but the March value increased to a value of 51.6 suggesting that the trend had reversed. Indeed, the March value is the strongest PMI for French business output for two and a half years – rather indicating the weakness of the French economy, of course.
Analysts had been pessimistic about the March PMI, suggesting that a further contraction was likely. The French result is in contrast to the general picture for the 18 states using the Euro; the Eurozone composite PMI fell marginally in March to 53.2 from a February reading of 53.3 – so growth in France is still below the general level seen amongst the rest of her Eurozone partners. The average economic performance of the Eurozone has now seen nine straight months of growth. Other data suggested that there had been a marginal improvement in the employment situation in the Eurozone for a second month, but unemployment continues to hover around the 12% mark with strong regional variations. Markit are predicting that the Eurozone economy will grow by 0.5% in Q1 2014.
The fact that the situation in France has started to improve is being seen as further evidence that the weak (let’s be honest…) recovery within the Eurozone is gaining some traction. The acid test of this will be when unemployment figures improve markedly as business confidence and demand create fresh employment opportunities.