France and Germany slowing eurozone growth

<p>The PMI for the eurozone dropped to 52.8 during August.</p>

France and Germany's sluggish economies have been highlighted as the reason for a slowing of business growth in the eurozone.

The latest Markit Composite Purchasing Managers' Index (PMI) stood at 52.8 for August, a decline from the 53.8 in July. Any figure over 50 represents growth in the market but analysts believe it could have been more positive had it not been for the poor performances of economies in both France and Germany.

Both countries saw an overall drop with France experiencing a contraction within its manufacturing sector. The country, which saw its service sector perform strongly over the course of August, posted a reading of 50. It marked an improvement on the 49.4 recorded in July but did not match the growth rate seen in other countries around the eurozone.

In Germany, its PMI actually from 55.7 in July to 54.9 hampered the rest of the eurozone continue its recovery following the financial crash of 2008. The poor performance of both France and Germany comes before any of the repercussions felt by new sanctions imposed on Russia due to the crisis in Ukraine.

Rob Dobson, senior economist at Markit, said: "Even before rising geopolitical headwinds began to buffet the economy, the double-digit unemployment rate prevailing in the eurozone was already excessively high. Signs are that the modest job creation of recent months has stalled in August."

The European Union and US imposed fresh sanctions on Russia following the alleged shooting down of Malaysian Airlines flight MH17 by rebels in eastern Ukraine. In retaliation to the move, Russia announced a full embargo on food imports from the countries involved and it has sparked fears of job losses in the UK.

Companies within sectors such as fishing conduct a lot of business with Russia and there is a fear that without a lack of investment it could lead to a drop in revenues.

Find up to date information on spread betting strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.