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Europe's economic gap widens

Europe's economic gap widens
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The eurozone was dragged into a deeper downturn in February by the struggling economies of France, Spain and Italy.

The latest business surveys of thousands of companies across the 17-nation currency bloc show a widening gap between those countries and prosperous Germany.

The divide between Germany and France, the eurozone’s two biggest economies, grew to its greatest since the currency union was set up in 1999.

The company that carried out the business surveys said they point to the eurozone economy shrinking around 0.2 percent this quarter.

Only German’s strength will save the bloc from a downturn as bad as the 0.6 percent decline at the end of last year.

“Two months into 2013, we’ve been somewhat disappointed with the eurozone economy’s progress,” said Victoria Clarke, economist at Investec in London.

“Germany’s doing a bit better than the rest of the pack, but in general, there’s no real sign there of stabilisation, or of the contraction at least bottoming out.”

UK’s mixed outlook

By contrast, Britain’s services purchasing managers’ index hit a five month-high in January according to survey results released at the same time. The services sector accounts for the bulk of the UK economy.

However, the upbeat services number follows dire construction and manufacturing PMIs there from the last few days.

“Maybe a small glimmer of hope is showing through for the UK services sector amidst deepening gloom for the UK economy,” said David Brown from New View Economics.

He added that it was far too tenuous to suggest the services PMI meant there was some uplift in economic activity this quarter, if the poor manufacturing data was included in the assessment.

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