European Manufacturing Expands, Services Growth Accelerates

Europe’s manufacturing expanded for the first time in 17 months and services industries grew at a faster pace in October as evidence mounted that the global economy is pulling out of the recession., Bloomberg 10/23/2009 8:51:39 AM

An index of manufacturing rose to 50.7 this month from 49.3 in September and a services gauge increased to 52.3 from 50.9, London-based Markit Economics said. German business confidence rose to a 13-month high, a separate report showed.

European companies are stepping up output to meet reviving orders after governments around the world spent $2 trillion in stimulus measures to fight the worst recession in at least six decades. The International Monetary Fund said on Oct. 1 that the global economy will expand at a faster pace than previously expected in 2010. Still, the euro’s ascent against the dollar may curb the recovery in Europe.

A composite index of manufacturing and services industries in the euro-area economy rose to 53 from 51.1 in September, Markit said in report. That was the highest since December 2007.

Adding to signs of global recovery, German business sentiment improved to the highest since September 2008 this month, the Ifo institute in Munich said today, citing a survey of 7,000 executives.

The European Central Bank has cut its key rate to a record low of 1 percent and started buying as much as 60 billion euros of covered bonds to stimulate bank lending and boost investments and consumption. ECB President Jean-Claude Trichet said on Oct. 9 that it is not the time to exit yet” with the economy expected to show a rather uneven” recovery.

The euro has appreciated around 7.5 percent against the dollar over the past five months, bringing annual gains to 6.9 percent. Dublin-based C&C Group Plc, the maker of Magners cider, on Oct. 8 reported a drop in first-half profit and said trading conditions have become more challenging.”

In the year’s first seven months, euro-area exports to the U.S., the region’s second-largest trading partner, dropped 20 percent from a year earlier, data showed on Oct. 16. Shipments to the U.K. fell 26 percent and exports to China dropped 4 percent in that period.

Euro-area unemployment rose to 9.6 percent in August, the highest in more than a decade, and the IMF last week forecast it will reach 11.7 percent next year, higher than in the U.S. or the U.K.

European Manufacturing Expands, Services Growth Accelerates