Euro-Area Services Output Contracts Less Than Estimated

European services output shrank less than initially estimated in January, adding to signs the currency bloc’s economy may be beginning to emerge from a recession.

An index based on a survey of purchasing managers in the services industry rose to 48.6 from 47.8 in December, London- based Markit Economics said in a report today. That’s above an initial estimate of 48.3 published on Jan. 24. A reading below 50 indicates contraction. The gauge has been below that mark for 12 months.

The 17-nation currency bloc’s economy will stagnate in the first three months of this year after contracting for a third successive quarter at the end of 2012, according to the median of 26 economists’ forecasts in a Bloomberg News survey. Economic confidence in January rose to the highest since June.

“The euro zone is showing clear signs of healing, with the downturn easing sharply in January and the region moving closer to stabilization in the first quarter,” Chris Williamson, chief economist at Markit, said in today’s report.

The euro extended gains against the dollar after today’s report was released, trading at $1.3540 at 10:15 a.m. in Brussels, up 0.2 percent on the day.

‘Darkest Clouds’

A composite gauge of euro-area services and manufacturing output improved to 48.6 from 47.2 in December, today’s report showed. Markit’s index of manufacturing output, released on Feb. 1, climbed to 47.9 from 46.1.

European Central Bank President Mario Draghi said on Jan. 22 that the worst of the debt crisis may be over and the “darkest clouds” have lifted thanks to decisive policy steps last year.

Still, euro-area unemployment of 11.7 percent and continued austerity measures by governments across the euro area may undermine consumer sentiment and spending.

Hannover Re (HNR1), the world’s fourth-biggest reinsurer, said yesterday that it expects earnings to remain little changed this year as tougher competition weighs on growth rates.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.