The euro zone's recovery has eked out further gains in August although weakness in France pointed to the uneven nature of the rebound, a leading business survey showed yesterday.

The composite Markit purchasing managers' index (PMI), combining both manufacturing and services sectors, rose to 51.7 in a "flash" or preliminary reading for August from 50.5 in July – its highest level in two years. Any reading above 50 indicates overall growth. New manufacturing orders across the bloc, particularly in Germany, drove expansion.

Modest return to growth
"The third quarter is shaping up to be the best that the euro area has seen in terms of business growth since the spring of 2011," said Chris Williamson, Markit chief economist. "The economic picture from the surveys is therefore coming in line with policy makers' expectations of a modest yet still fragile return to growth."

The fragility was underlined by the data group’s survey of France, which showed private sector output falling at a faster rate. The flash France composite output index fell to 47.9 in August from 49.1 in July, putting output more firmly in contractionary territory.

With unemployment still near record levels, austerity measures curtailing government spending and bank lending to companies falling, the euro area is dependent on exports for its recovery, making the turmoil in emerging markets worrying. However, a rise in the HSBC flash China manufacturing PMI to 50.1 in August from 47.7 in July provided some optimism.

"Exports to China dwarf those to the worst-hit countries of the latest turbulence," said Christian Schulz, an economist at Berenberg. "China received more than 6 per cent of Germany's exports last year, six times as much as India. "

Markit's US flash PMI data showed manufacturers continue to expand, with the index nudging up to 53.9 in August from 53.7.
– (Copyright The Financial Times Limited 2013)