Euro-area services output shrank at a slower pace than initially estimated in July, adding to evidence the economy is gathering strength to pull out of a record-long recession.
An index of activity in the services industry based on a survey of purchasing managers rose to 49.8 from 48.3 in June, London-based Markit Economics said in a report yesterday. That was above an initial estimate of 49.6 on July 24th. A reading below 50 indicates contraction.
Manufacturing in the 17-nation economy expanded at a faster pace than initially estimated last month as the industry resumed growth after two years of contraction.
European Central Bank president Mario Draghi said last week recent indicators signal the euro zone is past the worst of the slump and data “tentatively confirm the expectation of a stabilisation in economic activity”.
Report 'fuels hope'
Yesterday's report "fuels hope that euro-zone GDP has finally stopped contracting and is on course to eke out marginal growth over the second half of the year," said Howard Archer, chief European economist at IHS Global Insight in London. "The hope for the euro zone is that current rising confidence encourages businesses to increasingly pare back their job-cutting and become more prepared to invest, and also encourages consumers to spend more."
The euro-area factory gauge increased to 50.3 last month from 48.8 in June, Markit said on August 1st. That exceeded the estimate of 50.1 published on July 24th. A composite index of both manufacturing and services rose to 50.5 in July from 48.7 in the prior month, topping the 50 mark for the first time since January 2012, Markit said yesterday.
'Welcome return to growth'
The report "confirms a welcome return to growth for the euro-zone economy at the start of the third quarter, raising hopes that the region can finally claw its way out of its longest-running recession," Rob Dobson, senior economist at Markit, said in the report.
“Manufacturing is leading the way out of contraction, with some nations benefitting from improved export demand.”
In Asia, China’s economy is showing signs of stabilising after slowing for two quarters, with official manufacturing and services indices rising and gains in gauges of business expectations. The non-manufacturing purchasing managers’ index increased to 54.1 in July from 53.9, the first acceleration since March.
Europe’s economy, which has contracted for six straight quarters, probably stagnated in the three months through June and will return to growth this quarter, according to a Bloomberg survey of economists. – (Bloomberg)
