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Eurozone periphery diverges ever more in growth indicator

24 January 2011, 14:25 CET

(BRUSSELS) - Eurozone business activity in debt-pressured peripheral states again lagged markedly in January, according to analysis of a closely-watched survey into manufacturing and services trends Monday.

Growth accelerated in both manufacturing and services, echoing all but one of the 18-month recovery period, London-based Markit researchers said of their purchasing managers' index (PMI), a survey of 4,500 euro area companies.

The index hit 56.3 points in January, up from 55.5 in December -- any score above 50.0 suggests economic expansion.

Manufacturing activity, though, dipped, and "the divergence between Germany and the rest of the single currency area has reached a new high," according to Markit chief economist Chris Williamson.

Outside of France and Germany, "the periphery has now seen new orders fall in four of the past five months," he said, with employment also falling outside of the two biggest economies, "especially in the service sector, which is feeling the pinch from austerity-hit domestic demand more than manufacturing."

London-based IHS Global Insight analyst Howard Archer, a careful student of the data, said the "lagging performance of the southern periphery countries and Ireland is an ongoing major concern."

With fiscal tightening accelerating, consumer spending receding and confidence slipping in an environment of rising inflation, static wages and still high unemployment, he said the European Central Bank "is very aware that higher interest rates are the last thing that Ireland, Greece, Portugal, Spain and Italy need."


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