Euro-zone private sector activity returned to modest growth in January, reinforcing hopes the currency bloc may rebound in the first quarter after a likely slump in the last three months of 2011.
Markit Economics Friday said its final composite purchasing managers index confirmed a rise to 50.4 from 48.3 in December, putting it marginally back above the 50.0 threshold that separates growth from contraction.
That is the first growth reading for the 17-nation currency bloc in five months, and adds to other recent signs the economy picked up at the start of 2012.
The strong reading contrasts with a dismal set of retail sales figures for December, underscoring the dire performance of the euro zone economy at the end of last year.
Eurostat, the European Union's statistics agency, Friday said the volume of retail sales in the euro zone fell 0.4% from November and by 1.6% from December 2010.
The drop in sales was unexpected because December is usually a busy month for retailers. The last time sales fell in December was in 2008, when the euro zone was in a recession triggered by the escalation of the financial crisis in the wake of the collapse of Lehman Brothers.
The figures are the latest in a series of poor data covering the fourth quarter of 2011. The first official reading of gross domestic product for the period will be published later in February. Many economists say the economy probably shrank.
By contrast, January's PMI readings suggest "business conditions stabilized following declines seen in the final four months of last year," said Chris Williamson, Chief Economist at Markit.
"The region may avoid a slide back into recession," he said. A technical recession is defined by two straight quarters of falling output.
Growth in January was restricted to Europe's two biggest economies, suggesting a two-speed Europe is taking shape.
German business activity grew robustly, its PMI rising to 53.9 from 51.3—a seven-month high. In France the index rose to 51.2 from 50.0, its strongest reading in five months.
But while some of the debt-saddled nations on the euro zone's periphery also showed improved figures, it wasn't enough to push them over the 50 threshold that signals growth.
Italy's index rose to a four-month high of 45.7, while Spain's climbed to 46.0, its highest in six months. Ireland's composite reading sank to a two-year low of 47.9.
"The southern European economies' PMIs are still consistent with output contraction and we continue to expect weak GDP figures in the first half as fiscal consolidation bites," said Ken Wattret, economist at BNP Paribas SA.
Still, January's improvement means "the risk of a meltdown of economic activity has clearly receded," he said.
