Euro Area PMI – Germany Pulls Ahead, France Is a Mess

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Euro Area PMI Released by Markit

The final euro area PMI data have been released by Markit, following on the heels of a number of individual country PMI releases. The most important take-away is that as already indicated by the 'Flash' PMI releases, the euro area as a whole has seen a slight slowdown in its economic contraction, which is largely owed to renewed expansion in Germany, while France is slip-sliding away into socialism-induced stagnation. In fact, the data from France continue to be a downright horror-show.

Markit's chief economist Chris Willamson commented:

“The eurozone is showing clear signs of healing, with the downturn easing sharply in January and the region moving closer to stabilisation in the first quarter.

“Growth is heavily skewed towards Germany, however, where the contrast with the contraction seen in France is the greatest seen since the survey began in 1998. While German companies reported the strongest growth for almost a year-and-a-half, French firms suffered the steepest downturn for nearly four years, with output falling at a much faster rate than in both Spain and Italy.

“More encouragingly, rates of loss of new business eased in France, Italy and Spain, accompanied by a return to growth in Germany, presenting a more consistent picture of demand moving in the right direction across the region.”

(emphasis added)

The entire report can be seen here: Euro Area PMI (pdf)


Euro area PMI and GDP – click for better resolution.

The Socialist Mess

France in a worse contraction than even Spain or Italy? Say it ain't so…wasn't Mr. Hollande going to be the 'growth president'? That is what happens when you chase the producers of wealth away by imposing punitive taxes. France could easily become the next flashpoint of the euro area's debt crisis (the crisis is not over yet, in our opinion. It has merely been in an extended 'pause mode').

Both France's services and manufacturing PMI have slipped further into contraction, with services experiencing the steepest slump since March of 2009 (!), falling to a 46 month low. Manufacturing saw an accelerated fall in both production and employment. A chart of France's composite PMI is below:


The sorry state of France's economy – click for better resolution.

The complete reports on France are available here: France Services PMI (pdf) and France Manufacturing PMI (pdf).

Looking at a long term chart of the  French stock index CAC-40, we can see that in spite of the recent mini-euphoria in euro-land stocks, the index has traced out what looks like a classical corrective structure that is highly likely to be followed by a plunge to new lows:


The CAC 40, weekly. The recent rally looks like a typical A-B-C correction. The primary trend remains down – click for better resolution.

You might say that the French people didn't want it otherwise, after all, they elected Mr. Hollande and his bunch of geniuses. Moreover, we know from polls that the anti-capitalist mentality is deeply rooted in the French psyche if you will. Nowhere is the free market more hated in the West today than in the country that has given the world economic thinkers of the caliber of a Turgot or a Bastiat.

However, that would be unfair to all those in France who did not vote for the socialists and who probably see little by way of alternatives to statism on offer in France's political landscape (Sarkozy was economically illiterate as well).  In fact, even though the mainstream parties are simply unelectable (in our opinion), the political fringe in France is even worse. It consists of either far-left ideologues (Melanchon's left-of-Hollande coalition of Marxists) or far-right xenophobes (Le Pen's national socialist party). There really is no palatable choice for anyone who is in favor of liberty and free markets as far as we are aware.

We therefore expect the exodus of France's best and brightest to continue apace. The country is already running out of money to distribute and this is set to worsen in coming years.


'Mr. Growth' – the perpetually befuddled looking Mr. Hollande.

(Photo via foxnewsinsider)

Charts by: Markit, BigCharts

Source: Acting Man

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About Pater Tenebrarum