Greek, French economy fears

Countries still mired in contraction – Markit WARNING lights are flashing over the Greek and French economies, analysts said yesterday, after a closely watched manufacturing survey showed the countries remained mired in contraction last month.

Turmoil in Greece, and fears the country could default on its debt and be forced out of the eurozone, pushed Greek activity to a 22-month low, according to Markit’s latest manufacturing barometer.

The figures also suggested that the European Central Bank’s ß1.1- trillion (R14.8-trillion) bond-buying programme, which has helped to weaken the euro, has so far failed to lift France out of its chronic malaise.

French manufacturing activity contracted for the 11th consecutive month last month, with the rate of decline the fastest yet this year. Markit also said employment levels fell for the 13th month last month.

“The French manufacturing sector remains locked in reverse gear,” Markit economist Jack Kennedy said.

“Production levels were cut at an accelerated rate amid a steeper decline in new orders.

“This was despite a further fall in prices charged and the recent weakening of the euro, underlining the competitive challenge facing firms.” Markit’s French manufacturing purchasing managers’ index (PMI) fell to 48 last month, from 48.8 in March. This was lower than a flash estimate of 48.4 and well below the 50 level that divides growth from contraction. Greece’s PMI contracted to 46.5, from 48.9.

The weaker-than-expected readings dragged down the rest of the eurozone, which expanded at a slightly slower pace last month. Markit’s final eurozone manufacturing PMI stood at 52 last month from 52.2 in March.

The pace of activity in Germany, Europe’s biggest economy, also moderated.

Markit’s chief economist, Chris Williamson, said: “Warning lights are flashing particularly brightly over France and Greece, both of which saw accelerating rates of decline at the start of the second quarter.