France faints in the core euro zone

The purchasing managers’ index, which analysts use as indicator of economic health, dropped in September in France from 48 to 44.1 at its lowest level since 2008. This sends a message of uneasiness in France’s ability to hold hands with its partner in the so-called core euro zone: indeed, Germany’s PMI has increased from 47 to 49.7.

While Bloomberg market expectations signalled that the euro zone’s PMI would recoup some points to the 46.6 mark, it has fallen from 46.3 to 45.9, which is the minimum reached since 2009.

No one now believes the data from the third quarter of the year will bring positive news for the euro area. All numbers below 50 mean economic contraction, and the International Monetary Fund is unlikely to deny in its coming forecast on global growth that, dragged down in no uncertain terms by Europe, the rest of the world is consistently recording decreases of activity.

But the French mishap has attracted considerable amounts of attention, even in the midst of such grey panorama. The reason is that it leaves Germany even more isolated, although it is so in its strength. France’s GDP could be negative, at -0.2 percent, by the end of this month, according to technical reports. And the truth remains that Germany alone cannot guarantee that Europe recovers its past stability.

As investor advising house Afi in Madrid said in a note today, “the evolution of these indexes in Germany is improving, yet continues placing the country’s economy far from the territory of a sound expanding economy. We will watch Germany’s exports activity, which will probably show proof of slowing down sooner than later.”

Eurostat retail trade estimates in July recorded a fall in Germany of -0.9 percent month on month, the same figure than the whole of the euro zone’s.