Return to growth in France, Germany’s expansion help shrug off Brexit vote
A return to growth in France and a solid pace of expansion in Germany have helped the eurozone shrug off the UK’s vote to quit the EU.
Economists feared the eurozone would suffer a damaging blow from the Brexit vote as exports to the UK became more expensive and business confidence waned. But those concerns appeared unfounded after the August composite IHS Markit survey – which brings together manufacturing, services and construction – indicated GDP growth across the 19-member currency zone will continue at 0.3% a quarter and 1.2% for the year.
France posted a rise in output driven by the private sector, which increased output at the sharpest rate in 10 months during August. The IHS Markit purchasing managers’ index jumped to 51.6, up from 50.1 in July, where a figure above 50 indicates an expansion in activity.
The better-than-expected news for François Hollande, follows a report showing that France’s unemployment rate fell below 10% in the second quarter, the lowest level since the French president took office in 2012.
In Germany, a slowdown in the services sector was offset by strong export growth reported by manufacturers. The balance left the economy with slightly lower growth, but employers still faced large backlogs of work and increased employment to match the buoyant outlook.
Political instability continues to threaten the recovery in the eurozone as countries as diverse as Italy, Finland and Greece struggle to recover from the 2008 financial crash. The refugee crisis and the longer-term threat of the UK leaving the EU are also high on European leaders’ agenda at a meeting in Naples this week, which seeks to breathe new life into the European project.
Chris Williamson, chief business economist at the data provider, said that in the short term there were “no signs of the recovery being derailed by Brexit uncertainty”. He said: “The survey data are consistent with the region’s GDP growing at a quarterly rate of 0.3% in the third quarter, or 1.2% annualised, which is similar to that seen on average over the first half of the year.”
