Europe Services, Manufacturing Strengthen; Sales Rise

Growth in Europe’s services and manufacturing industries accelerated at a faster pace than initially estimated and retail sales increased more than economists forecast, led by Germany.

A composite index based on a survey of euro-area purchasing managers in services businesses and factories climbed to 55.5 in November from 53.8 in October, London-based Markit Economics said today. It initially reported a gain to 55.4. Retail sales rose 0.5 percent in October, the European Union statistics office in Luxembourg said. Economists forecast 0.2 percent, the median of 19 estimates in a Bloomberg News survey shows.

Germany has powered the region’s recovery after global growth boosted demand at companies including carmaker Daimler AG and pushed down unemployment. With governments stepping up austerity measures to counter a sovereign-debt crisis that forced Ireland to seek aid last month, the European Commission on Nov. 29 forecast a slowdown in 2011.

“The euro region’s dynamic is still rather robust with Germany as the growth engine,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “It looks like we’ll see a positive surprise for fourth-quarter growth. Private consumption should gain ground, bolstering imports and hence the recovery.”

A gauge of services industries increased to 55.4 from 53.3, Markit said. A reading above 50 indicates expansion.

The euro rose against the dollar today, and was at $1.3258 as of 10:06 a.m. in London compared with $1.3209 yesterday.

German Boost

In Germany, Europe’s largest economy, the services gauge jumped to 59.2 in November, the highest since August 2007, from 56 the previous month. That’s above an initial estimate of 58.6. The country’s composite index for services and manufacturing increased to 59 from 56.

Germany also led the gain in retail sales, with an increase of 2.3 percent in October from the previous month. The next strongest performance was Belgium’s 1.4 percent gain. From a year earlier, euro-area retail sales increased 1.8 percent.

The Bundesbank raised its forecast for 2010 German economic growth today, projecting the fastest expansion since data for a reunified country began in 1992. Gross domestic product will expand 3.6 percent in 2010 and 2 percent in 2011, the Frankfurt- based central bank said. In June, it predicted growth of 1.9 percent this year and 1.4 percent next year, though in October it said the economy may expand “more than 3 percent” in 2010.

Periphery Struggles

In France, the services indicator edged up to 55 from 54.8, while Italy’s gained to 54.5 from 51, Markit said.

Europe’s so-called peripheral nations continued to struggle. Spain’s services industry shrank in November, while Ireland’s grew “marginally,” according to NCB Economics in Dublin. The Irish index slipped to 50.8 from 50.9.

The European Commission on Nov. 29 forecast euro-region growth to weaken to 1.5 percent in 2011 from 1.7 percent this year, and said there’s “a very high” level of uncertainty. While Germany may expand 3.7 percent this year, the economies of Ireland, Greece and Spain will continue to shrink.

The euro-region’s manufacturing gauge rose to 55.3 in November from 54.6 the previous month, Markit said on Dec. 1.

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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