Euro zone business expands for first time in 18 months: PMI

Mon Aug 5, 2013 4:04am EDT
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By Andy Bruce

LONDON (Reuters) - Euro zone business expanded for the first time in 18 months in July, albeit very slightly, according to a survey on Monday that suggested the economy is slowly starting to stabilize.

Markit's Eurozone Composite Purchasing Managers Index (PMI) rose to 50.5 last month from 48.7 in June, breaking above the 50 threshold indicating growth for the first time since January 2012. The headline figure was revised up a tick from a preliminary reading of 50.4.

The survey gauges how thousands of euro zone companies fare every month. Although new orders fell again in July, the rate of decline was the weakest since August 2011.

Overall, the survey suggested the economy is starting to exit recession - even if healthy growth still looks like a distant prospect.

"Granted, the euro area has experienced false dawns before, but the improvements in confidence and other forward-looking indicators warrant at least some optimism for the outlook this time around," said Rob Dobson, senior economist at PMI compiler Markit.

"The real sparks which will hopefully ignite the recovery are the increasing signs of stabilization in domestic markets. This not only aided manufacturers, but also pulled the service sector right back to the cusp of recovery."

German business activity rebounded in July, while the downturns in the euro zone's next three biggest economies - France, Italy and Spain - eased.

The region-wide survey's jobs index rose to 48.6 last month from 47.4, signaling a slowing pace of job cuts.   Continued...

Workers assemble a new Audi R8 car body in the automotive welding and assembly lines hall of the German car manufacturer's plant in Neckarsulm July 3, 2013. REUTERS/Michaela Rehle