A better than expected number for flash French manufacturing output data isn't enough for the country to shake its image as the sick man of Europe, especially when the data shows the sector is still contracting, says Berenberg Chief Economist, Christian Schulz.

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LONDON, ENGLAND, UNITED KINGDOM (JANUARY 23, 2014) (REUTERS - ACCESS ALL)

1. BERENBERG BANK SENIOR ECONOMIST, CHRISTIAN SCHULZ, SAYING: (CONTINUES OVER REPORTER ASKING QUESTIONS)

REPORTER ASKING QUESTION: 'Well Christian, let's start with France. Is the sick man of Europe finally getting better?'

BERENBERG BANK SENIOR ECONOMIST, CHRISTIAN SCHULZ: 'Well it's a slight improvement, pretty strong in the manufacturing sector, less in the more domestic oriented services sector. In terms of confidence, not much progress if companies remaining optimistic but actually less so in December. So the Hollande effect, these reform announcements really not coming through yet. And we have to keep in mind that the PMIs remain below the 50 mark, so below neutral, signaling that the economy or output could still be shrinking. And finally we have to keep in mind that France is still way behind the rest of the Eurozone, in particular Germany. So the sick man image is not shed by one positive release of data.'

REPORTER: 'And as you say, the French manufacturing output is still shrinking but at a slower pace, yet having said that, the manufacturing PMI from France did beat all 22 economists' forecast in a Reuters poll. Does that tell us more about the French economy recovering or more about economists' forecast?'

SCHULZ: 'Probably more about economists' forecast to be honest. I think generally, the economists are right in forecasting that the French economy will still underperform the rest of the Eurozone. But this indicator is very volatile. And so it's quite difficult to forecast on a month-to-month basis.'

REPORTER: 'Okay Germany obviously the economic and financial power house of Europe powering ahead in January. Again, the manufacturing PMI smashing forecast and they're topping all 32 economists' forecast in that Reuters poll.'

SHUCLZ: 'Indeed. That is a big jump, 56.1. That really shows that Germany is reaching proper recovery speed at least in the manufacturing sector. And for German manufacturing, it's really a whole range of factors which is pushing the recovery. We've got very low interest rates from the ECB, improving confidence that's boosting investment. The global picture is also improving. Germany is involved everywhere in the globe in terms of export. So the export outlook is also brightening. And finally, the Eurozone crisis is fading which removes that uncertainty for companies as well. So really a broadly positive picture. We think that 2014 could be a really strong year for Germany because investment is picking up and consumption which already was strong in 2013 should continue growing in 2014 as well as the fundamental situation of German household is very good.'