Worst may be over for euro zone factories: PMI

Fri Feb 1, 2013 6:05am EST
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By Jonathan Cable

LONDON (Reuters) - Euro zone factories had their best month in nearly a year during January as burgeoning German output offered support amid signs the worst may be over for the troubled currency bloc, a survey showed on Friday.

While Markit's Purchasing Managers' Index (PMI) pointed to a continued decline in activity, it rose to an 11-month high, suggesting the downturn in manufacturing output - which fell for most of last year - has passed its nadir.

The PMI rose to 47.9 from December's 46.1, ahead of an earlier flash reading of 47.5. The index has been below the 50 mark that separates growth from contraction since August 2011.

The output index, which feeds into a broader gauge of the economy, the Composite PMI, due next Tuesday, rose to a 10-month high of 48.7 from December's 46.0. That was the biggest one-month jump in a year.

"While the industrial sector looks likely to have acted as a drag on the euro zone economy in the final quarter of last year, deepening the double-dip downturn, the PMI provides hope that the first quarter could mark the start of a turnaround," said Chris Williamson, chief economist at Markit.

"Providing there are no further setbacks to the region's debt crisis, these data add to the expectation that the euro zone is on course to return to growth by mid-2013."

The bloc's economy likely contracted 0.4 percent at the end of last year, chalking up its third negative quarter, and will only stagnate in the current period, according to a Reuters poll published last month.

An earlier PMI of 49.8 from Germany, Europe's largest economy, showed factory activity just about held steady last month with the index seeing its biggest one-month jump since the middle of 2009. Germany's output index leapt to 51.9 from 47.1.   Continued...

A worker stands in front of a rolling mill in the ArcelorMittal steel factory in Eisenhuettenstadt, 124 km (77 miles) east of Berlin November 26, 2012. REUTERS/Thomas Peter