U.S. activity picks up, hopes for euro zone rise

Fri Jan 4, 2013 10:54am EST
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By Steven C. Johnson and Andy Bruce

NEW YORK/LONDON (Reuters) - Business activity in the United States perked up in the final month of 2012, surveys showed on Friday, while hopes grew that Europe may be through the worst of its economic slump.

Britain's vast services sector, however, contracted for the first time in two years, suggesting the broader economy probably shrank as well in the final three months of 2012.

The Institute for Supply Management said its index of U.S. service firms grew at its fastest clip in 10 months in December, boosted by a rise in new orders. The pace of hiring in the sector hit a five-month high.

Throughout the U.S. economy, employers added 155,000 new workers last month. Gains were distributed broadly, from manufacturing and construction to health care, which economists say suggests the economy would probably grow by about 2.0 percent in 2013.

"The overall tone was one consistent with modest economic growth," said Joshua Shapiro, chief U.S. economist at MFR, a global consulting firm based in New York.

The 17-country euro zone, on the other hand, probably closed out the year in recession, though evidence that the pace of contraction in the service sector had slowed suggested things may be turning around.

"I think (the euro zone PMIs) are showing a decisive bottoming-out of activity," said James Nixon, chief European economist at Societe Generale.

"Now, the actual levels of the surveys are still consistent with GDP declining, but at least things aren't getting worse any faster."   Continued...

A view of New York's lower Manhattan from the Staten Island Ferry March 10, 2008. REUTERS/Brendan McDermid