Eurozone business expands for first time in 18 months

Reuters, LONDON

Tue, Aug 06, 2013 - Page 15

Eurozone business expanded last month — the first time in 18 months — albeit very slightly, according to a survey released yesterday that suggested the economy is slowly starting to stabilize.

Markit’s Eurozone Composite Purchasing Managers Index (PMI) rose to 50.5 last month from 48.7 in June, breaking above the 50 threshold indicating growth for the first time since January last year. The headline figure was revised up a tick from a preliminary reading of 50.4.

The survey gauges how thousands of eurozone companies fare every month. Although new orders fell again last month, the rate of decline was the weakest since August 2011.

Overall, the survey suggested the economy is starting to exit recession — even if healthy growth still looks like a distant prospect.

“Granted, the euro area has experienced false dawns before, but the improvements in confidence and other forward-looking indicators warrant at least some optimism for the outlook this time around,” Markit senior economist Rob Dobson said.

“The real sparks which will hopefully ignite the recovery are the increasing signs of stabilization in domestic markets. This not only aided manufacturers, but also pulled the service sector right back to the cusp of recovery,” he said.

German business activity rebounded last month, while the downturns in the eurozone’s next three biggest economies — France, Italy and Spain — eased.

The regionwide survey’s jobs index rose to 48.6 last month from 47.4, signaling a slowing pace of job cuts.

The eurozone unemployment rate eased to 12.1 percent in June from May’s 12.2 percent, although more than 19 million citizens are still out of work, with joblessness endemic in Greece and Spain.

“The labor market remains the main bugbear of the eurozone, as rising joblessness hurts growth and raises political and social tensions. But even here there was some better news, with the rate of job cutting easing to a 16-month low,” Dobson said.

The services PMI, which covers firms ranging from banks to hotels, rose to 49.8 from 48.3 in June.

Optimism about the coming year rose to its highest since March last year, as the PMI backed a series of more upbeat sentiment indicators over the last week, among both investors and consumers.