Eurozone recovery in question as new two-speed divide emerges

Weaker than expected surveys of the services sector were released by Markit today, showing that of the eurozone’s four largest economies - German, France, Spain, and Italy - just one beat analysts forecasts.

Spain posted a services PMI of 58.1, up 1.9 points from the previous month, and at its highest level since December 2006.

Germany's services sector slowed down a little, but remained strong in August, slipping to 54.9 from July's 37-month high.

The equivalent number for Italy showed the services sector slipping back into contraction, as the French PMI came in at just 0.3 points above the zero-expansion mark.

"Those countries which have adopted painful labour market reforms during the euro crisis are now enjoying the benefits, while those countries which avoided them and relied on tax hikes to consolidate public finances are falling behind", said Mr Schulz.

Berenberg expects to see eurozone growth remain flat for most of the second half of 2014.

The overall currency bloc was dragged lower by falling performances from both manufacturing and services.

The eurozone is “clearly struggling for growth”, said Howard Archer, of IHS Global Insight, who highlighted ongoing geopolitical tensions as weighing on confidence in an “already challenging environment”.

Chris Williamson, chief economist at Markit, said that the impressive performances of Ireland and Spain will encourage the European Central Bank “to stress that recoveries in other countries are being held back by the lack of successful structural reforms rather than a lack of central bank stimulus”.

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