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Germany and France economic divergence – Sober Look

This is a syndicated repost published with the permission of Sober Look. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

The Eurozone recovery continues to be uneven, powered primarily by a pickup in export-driven manufacturing and with only some nations participating. In particular we are witnessing a significant divergence between the area’s two largest economies, Germany and France. As German manufacturing firms gain momentum (see post), the French recovery has stalled.

The Telegraph: – Figures showing private sector growth across the Eurozone have underlined the widening chasm between the bloc’s economic giants, Germany and France, with the latter increasingly looking like the “sick man of Europe”. …

… looking at the separate surveys, it is clear that Germany is pulling away from France. Germany’s manufacturing sector grew at its fastest clip in 30 months, and services are expanding too. But in France, both sectors are in a sharpening decline.

it’s the unbalanced nature of the upturn among member states that is the most worrying. France looks increasingly like the new ‘sick man of Europe’, as a second successive monthly contraction may translate into another quarterly decline in GDP, pushing the country back into a technical recession. In contrast, the December survey data round off a solid quarter of growth in Germany, in which GDP looks set to rise by 0.5pc.

The following chart of manufacturing PMI trends tells the story of divergence. Note that a reading below 50 represents a contraction in the manufacturing sector.

Source: Investing.com

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