Europe Manufacturing, Services Expansion Accelerates

Europe’s services and manufacturing industries expanded at the fastest pace in two years in November after a reviving global economy helped the euro region emerge from the worst recession in more than 60 years., Bloomberg 11/23/2009 9:30:25 AM

A composite index based on a survey of purchasing managers in both industries in the 16-nation euro area rose to 53.7 from 53 in October, London-based Markit Economics said today in a statement. That was the highest since November 2007. A reading above 50 indicates expansion.

The European economy is gathering strength after global governments spent billions on stimulus measures to encourage spending. While euro-area exports increased the most in more than a year in September, the euro’s strength is making goods less competitive abroad just as rising unemployment undermines consumer spending, threatening the recovery.

An index of services rose to 53.2 from 52.6, Markit said. A gauge of manufacturing increased to 51 from 50.7.

Governments around the world have spent $2 trillion to fight the recession and the European Central Bank has cut its key interest rate to a record low of 1 percent and purchased covered bonds to stimulate bank lending. ECB President Jean- Claude Trichet said on Nov. 17 that the bank expects the euro- area economy to recover only at a gradual pace” in 2010.

Adding to signs of recovery, European investor confidence rose for a fourth month in November and industrial output also increased in September. In Germany, where Chancellor Angela Merkel’s government is spending 85 billion euros ($127 billion) to boost Europe’s largest economy, business confidence rose to the highest in 13 months in October.

German Finance Minister Wolfgang Schaeuble said on Nov. 20 that the nation’s economy will probably expand at a weaker pace in the current quarter than the 0.7 percent in the previous three months. Merkel on Dec. 2 will host a meeting to consider additional stimulus measures, according to Schaeuble.

The euro’s 18 percent gain against the dollar since mid- February is threatening to curb a recovery and hurting companies including European Aeronautic, Defence & Space & Co. The owner of Airbus SAS said on Nov. 16 that third-quarter earnings slumped 77 percent, partly because of a weaker dollar.

Companies across the euro region continue to cut jobs and reduce costs to help bolster earnings. European unemployment rose to 9.7 percent in September from 9.6 percent in the previous month. That’s the highest since January 1999.

Europe Manufacturing, Services Expansion Accelerates