Eurozone business activity made a surprise return to modest growth this month, adding to signs the downturn in the bloc may not be as deep as feared and that the currency union may escape recession, a survey showed.
S&P Global’s flash Composite Purchasing Managers’ Index (PMI), seen as a good gauge of overall economic health, climbed to 50.2 this month from 49.3 last month.
This month was the first time the index has been above the 50 mark, which separates growth from contraction, since June last year and the reading was ahead of the median Reuters poll forecast of 49.8.
Photo: Yves Herman, Reuters
“The survey undoubtedly brings welcome good news to suggest that any downturn is likely to be far less severe than previously feared and that a recession may well be avoided altogether,” S&P Global Market Intelligence chief business economist Chris Williamson said.
A mild winter so far, falling gas prices and recent positive economic data meant some quarterly growth forecasts in a Reuters poll published on Monday were upgraded although a technical recession was still predicted.
In a sign they are growing more optimistic, firms increased headcount at a faster rate this month. The employment index rose to a three-month high of 52.5 from 51.9 last month.
The PMI covering the bloc’s dominant services index also surprised to the upside, coming in at a six-month high of 50.7. It was at 49.8 last month and the Reuters poll had a forecast for 50.2.
Despite consumers facing large bills, demand only waned slightly. The new business index was just shy of the breakeven mark at 49.8, up from 48.4.
“The region is by no means out of the woods yet, however, as demand continues to fall — merely dropping at a reduced rate,” Williamson said.
Factory activity also showed an improvement but did still decline. The manufacturing PMI rose to 48.8 this month from 47.8, ahead of the 48.5 the Reuters poll forecast. An index measuring output which feeds into the composite PMI bounced to a seven-month high of 49.0 from 47.8.
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