WRAPUP 1-Surveys show pace of euro zone recovery moderating

* Euro zone flash PMIs slip slightly in August

* Germany and France set the pace, but rest of bloc lags

* Data consistent with euro zone growth of 0.7 pct in Q3

By Andy Bruce and Jonathan Cable

LONDON, Aug 23 (BestGrowthStock) – The euro zone’s economic recovery
moderated only slightly in August and companies are more
optimistic about the coming months despite a divergence in
growth rates between countries, a survey showed on Monday.

The Eurozone Flash Composite Purchasing Managers’ Index
(PMI), which gauges activity in thousands of services and
manufacturing companies, fell in August to 56.1 from 56.7 in
July, a slightly bigger fall than expected.

But it remained well above the 50 mark that divides growth
from contraction and survey compiler Markit said that was
consistent with quarterly growth of 0.7 percent, only just down
on the three-year high of 1.0 percent in the second quarter.

The numbers showed Europe’s recovery for now is holding up
better than that in the United States, and suggested a slowdown
— expected on the back of swingeing budget cuts and slacker
global demand — may take longer to arrive.

“The euro zone’s economic recovery is slowing down, but so
far retains significant forward momentum. That is the message,”
said Martin van Vliet of ING Financial Markets.

“All in all, the manufacturing-led decline in the August
composite PMI confirms that the euro zone is far from immune to
the U.S.-led slowdown in global growth momentum. But for the
time being the index still points to decent growth.”

The recovery of the U.S. economy slowed markedly in the
second quarter and economists polled by Reuters expect the euro
zone to follow suit in the quarters ahead, even if the odds of a
double-dip recession appear to be receding. [ECILT/EU]

The French government on Friday cut its 2011 growth outlook
to 2 percent, bringing it closer to that of private sector
economists, days after Moody’s credit ratings agency warned
France and other top “AAA”-rated countries were inching closer
to losing this rating. [ID:nLDE67J16B]

The euro (EUR=: ) dipped slightly against the dollar after the
release of the PMIs, and at 1017 GMT was trading at $1.2696, not
far off Friday’s five-week low of $1.2664 after Weber’s
comments. Stocks were unmoved.


Click here for graphic on the euro zone PMIs:


For Reuters Insider TV segments on PMI surveys, click on:





The report, however, added to signs of worrying divergence
between the robust expansion in France and Germany, and
stagnation elsewhere in the euro zone.

German service sector growth improved in August to its
fastest pace in three years, while it faltered among its
export-reliant manufacturers. In France, the situation was

“Outside of those two main nations conditions are still
subdued,” said Rob Dobson of survey compiler Markit.

“We are seeing this very much centred on the core nations,
it has not spread to the peripheral nations and in many ways
this divergence is widening.”

European Central Bank Governing Council member Axel Weber on
Friday was quoted as saying unlimited lending to banks should
continue past the end of the year, a key part of emergency
measures to keep credit flowing in the economy. [ID:nLDE67J16B]

Traders say many Spanish and Irish banks are still locked
out of interbank lending, meaning ECB support remains vital.

Earlier this month, official statistics showed the Spanish
economy grew an anaemic 0.2 percent in the second quarter
compared to the first, hurt by rampant unemployment, while
growth in Italy was not much better at 0.4 percent.

That compared with explosive quarter-on-quarter growth of
2.2 percent in Germany. But there are signs of slowing growth
among companies there — two weeks ago, Europe’s biggest
carmaker Volkswagen (VOWG_p.DE: ) warned business was becoming
“difficult”, while Ford (F.N: ) saw falling European sales.

In the United States, which entered and exited its Great
Recession before its European peers, the portents for growth
look generally grim.

On Thursday, data showed U.S. jobless claims hit a
nine-month high the previous week and factory activity in the
U.S. Mid-Atlantic region unexpectedly contracted in August —
the first time in a year.
(Additional reporting by Daniel Flynn in Paris and Krista
Hughes in Frankfurt, Editing by )

WRAPUP 1-Surveys show pace of euro zone recovery moderating