Activity in the eurozone economy stopped falling for the first time in 15 months, a key survey suggested, heightening hopes that the recession may be over in Europe.
The Purchasing Managers’ Index (PMI) gauge of activity in the services and manufacturing sectors in the 16 countries using the single currency rose to 50 in August, from 47 in July. Economists had expected a rise to 48.
This is the highest level in 15 months, and is up from a record low of 36.2 in February. Any figure below 50 indicates that activity is falling, while any number over 50 suggests it is rising.
The survey results come after recent official data showed that the recession in France and Germany, the powerhouse economies of region, ended in the second quarter. There was more good news as the EU’s official Eurostat data agency last week announced that the eurozone’s trade surplus doubled in June to Euro €4.6 billion (£3.9 billion).
The German services index suggested that the country was continuing to power out of recession. It picked up sharply from 48.1 in July to 54.1 in August — the strongest rise on record, which took the index to its highest level since April 2008.
“The data are signalling that the unprecedented downturn has been followed by an historically rapid rebound that positions the eurozone to post growth … in the third quarter,” said Rob Dobson, senior economist at Markit.
But he warned that rising unemployment and deflation remained threats: “Rising job losses and the continued need for widespread and deep price discounting remain concerns looking ahead, as a sustained recovery in demand is necessary if the emerging rebound is to gain traction.”
Colin Ellis, European economist at Daiwa, said that, unless demand from key trading countries such as the UK and the US picked up, it would be hard for Europe to sustain a significant recovery.
“The euro area economy may well now be at a trough. However, the key issue is still whether external demand will recover quickly enough to stimulate growth before the temporary fiscal packages — most notably the car scrappage schemes — expire.”