Euro-area services and manufacturing output contracted at a slower pace than economists estimated this month, adding to signs the currency bloc’s economy is beginning to emerge from a recession.
A composite index based on a survey of purchasing managers in both industries rose to 48.2 from 47.2 in December, London- based Markit Economics said today. Economists had forecast a January reading of 47.5, according to the median of 22 estimates in a Bloomberg News survey. A reading below 50 indicates contraction.
European Central Bank President Mario Draghi suggested this week the worst of the debt crisis may be over, saying the “darkest clouds” have lifted thanks to decisive policy steps last year. Investor confidence in Germany, Europe’s largest economy, rose to the highest in 2 1/2 years this month, and the ECB has forecast a gradual recovery in the euro area.
“The economy will probably embark on a path of ongoing moderate growth later in the year,” Aline Schuiling, an economist at ABN AMRO, said in a report yesterday. “Part of the upward potential will be wiped out by ongoing fiscal austerity, wage cuts in some countries and rising unemployment, though these drags on growth should gradually become less severe.”
Economic Stagnation
The euro-area services index improved to 48.3 in January from 47.8 a month earlier, Markit said. The manufacturing gauge rose to 47.5 from 46.1. Markit will publish the final reading for the factory index on Feb. 2 and the services and composite measures on Feb. 5.
Economists in a separate Bloomberg News survey published on Jan. 17 forecast that the euro-region economy will stagnate this quarter and resume expansion in the three months through June.
The economy probably shrank 0.4 percent in the final three months of 2012, according to the median of 26 estimates in the survey. The European Union’s statistics office in Luxembourg will publish its first estimate for fourth-quarter gross domestic product on Feb. 14.
“We can begin 2013 on a more confident note, precisely because significant progress was made during 2012,” Draghi said on Jan. 22. “The darkest clouds over the euro area subsided.”
Nestle SA (NESN) Chief Executive Officer Paul Bulcke said yesterday he expects European consumer confidence to slowly return.
Record Unemployment
Confidence “is going to come back,” he said in an interview at the World Economic Forum in Davos, Switzerland. “It’s going to take years though. It’s not going to be a fast- going out of the woods.”
Still, record euro-area unemployment of 11.8 percent and continued austerity measures by governments may undermine consumer sentiment and spending. Schuiling said that as many countries have fallen behind in their fiscal targets, additional tightening will be needed.
“Another factor that will continue to weigh on domestic demand is that unemployment is expected to remain at very high levels in most countries and will probably continue to rise well into 2014,” she said.
Siemens AG (SIE), Europe’s largest engineering company, said yesterday that European markets remain weak.
“The mood in Europe calmed down in the second half of 2012, but economic output in the euro zone will most likely decline once again,” Chief Executive Officer Peter Loescher said at a press conference. “The economic forecasts for the U.S. are still very cautious. However, we believe that the economic recovery there could pick up speed.”
To contact the reporter on this story: Fergal O’Brien in London at fobrien@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
