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Euro zone gets manufacturing boost, France drags

Monday, 2 Dec 2013 | 3:01 AM ET
Bloomberg/Contributor | Bloomberg

Manufacturing in the euro zone accelerated at its fastest pace in two and a half years in November, helped by a ramp-up in production. But disappointing data from France and Spain added to concerns about the health of the region's wider economy.

The Markit Manufacturing Purchasing Managers' Index (PMI) for the euro zone came in at 51.6 in November, compared with 51.3 the previous month. A reading over 50 marks expansion.

Higher levels of manufacturing production, new orders and new export business helped the figure hits its highest level since June 2011. November's growth marked the fifth consecutive month of expansion in the sector, and was higher than higher initial estimates of 51.5.

(Read more: As you were? Europe deflation fears despite upbeat data)

However, two of the euro zone's largest economies posted a slide in activity over the month, with France's PMI coming in at 48.4 (a 5-month low) and Spain's falling to 48.6 (a 6-month low).

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This mixed picture comes amid concerns about the strength of the euro zone's economic recovery. After the longest contraction in continental Europe in over 40 years, the region pulled out of an 18-month stretch of negative growth in the second quarter of 2013.

But data published earlier this month revealed that the euro zone's economic growth slowed in the third quarter. Gross domestic product (GDP) for the 17-nation bloc came in at just 0.1 percent quarter-on-quarter in the third quarter, marking a slowdown from a 0.3 percent expansion in the second quarter.

(Read more: Eurozone business morale hits 27-month high)

Markit's chief economist Chris Williamson said that although manufacturing in the region was enjoying its best performance for some time, the pace of growth remained modest.

"The November manufacturing PMI surveys bring good news on the whole, but suggest there's still a lot to worry about in terms of the health of the euro zone economy," he said in a statement accompanying the data.

Strong growth was recorded in November across Germany (a 29-month high at 52.7), the Netherlands (a 31-month high at 56.8) and Austria (a 30-month high at 54.3). Meanwhile, manufacturing in the U.K. - which is not part of the euro zone - grew at its fastest pace in almost three years, jumping to 58.4, from 56.5 in October.

(Read more: Eurozone economy losing steam as PMIs disappoint)

But Williamson highlighted that renewed downturns in both France and Spain meant their data disappointed. Manufacturing in Greece also contracted over the month (49.2), but this marked a 51-month high for the troubled economy.

"The big concern is France, which was the only country except Greece to see exports fall. With some improvement in domestic demand helping Greek producers report the first increase in output in over four years, France has sunk to the bottom of the euro zone PMI rankings," he said.

Howard Archer, chief U.K. and European economist at IHS Global Insight, also highlighted the "markedly divergent" performances across individual euro zone countries' manufacturing activity.

(Read more: Is the euro zone already running out of good news?)

"The modestly improved November manufacturing PMI showing activity at a 29-month high provides a small lift to hopes that the euro zone can gradually establish economic recovery," Archer wrote in a note. "Even so, the suspicion remains that the euro zone still faces a hard slog in developing recovery and remains vulnerable to relapses."

He highlighted that the sector had struggled to gain momentum since August (when it was 51.4), and had been stuck between 51.1-51.6 over the past four months.

By CNBC's Katrina Bishop. Follow her on Twitter @KatrinaBishop and Google

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