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European November Services, Manufacturing Growth Unexpectedly Accelerates
Growth in Europe’s services and manufacturing industries unexpectedly accelerated for the first time in four months in November as companies weathered the debt crisis and cooling global growth.
A composite index based on a survey of euro-area purchasing managers in both industries advanced to 55.4 from 53.8 in the previous month, London-based Markit Economics said today in an initial estimate. A reading above 50 indicates expansion.
Germany has powered Europe’s recovery while other nations have failed to emerge from the slump as governments step up austerity measures to rein in budget deficits. Ireland on Nov. 21 became the second euro-area country, after Greece, to seek external aid. The economic rebound also is under threat from a global slowdown and a stronger euro.
“This is obviously much needed good news for the euro zone, although it is notable and worrying that the periphery countries still appear to be struggling markedly,” said Howard Archer, chief European economist at IHS Global Insight in London. “It also remains to be seen how resilient activity will be over the coming months as fiscal tightening increasingly kicks in across the region.”
The euro trimmed its decline against the dollar after the data, trading at $1.3568 at 11:05 a.m. in London, down 0.4 percent on the day after touching a low of $1.3527 earlier.
The euro region’s services index rose to 55.2 in November from 53.3 in October, Markit said. The manufacturing gauge increased to 55.5 from 54.6.
‘Very Unbalanced’
Economic growth across Europe “remains very unbalanced,” said Chris Williamson, chief economist at Markit. “Growth outside of France and Germany appears to be stagnating at best.”
The euro region’s expansion slowed to 0.4 percent in the third quarter from 1 percent in the previous three months, with expansion in Germany, Europe’s largest economy, slowing to 0.7 percent from a record 2.3 percent. Spain’s economy stalled and Greece shrank.
While the global recovery helped companies from L’Oreal SA, the world’s largest cosmetics maker, to Hochtief AG, Germany’s biggest construction company, to beat third-quarter estimates, the euro’s 10 percent ascent against the dollar over the past six months may curb the pace of export growth.
The Organization for Economic Cooperation and Development on Nov. 18 cut its global growth forecast for next year, predicting a “soft spot” on fading government stimulus measures. In the euro region, the economy may fail to gather strength in 2011, the Paris-based organization forecast.
‘Growth Impulses’
“After benefiting from some strong growth impulses in the first half of 2010, the world economy will become more subdued toward the end of the year and beyond,” Munich-based chemical maker Wacker Chemie AG said on Nov. 22. “The pace of global recovery is slowing.”
Europe’s debt crisis is adding to concerns about the region’s economy. Ireland on Nov. 21 asked for help from the EU and the International Monetary Fund that Goldman Sachs Group Inc. estimates may total 95 billion euros ($130 billion). The Irish government made the request after European authorities expressed concern the crisis could spread to other euro nations such as Portugal.
Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said yesterday that the bailout package was the “right answer” and will help “calm the financial markets.” EU Economic and Monetary Commissioner Olli Rehn said the region’s recovery is “still fragile and uneven.”
The European Central Bank has extended emergency liquidity measures for banks into 2011 and stepped up purchases of government bonds. Still, ECB President Jean-Claude Trichet said as recently as Nov. 18 that the non-standard measures are “temporary” and the central bank must prevent crisis measures “evolve into a dependency.”
“The markets still have a huge amount of uncertainty,” said Ken Wattret, chief euro-region economist at BNP Paribas in London. “It would make sense to slow down the exit.”
To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net
To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net
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