Bloomberg News

Euro-Area Manufacturing, Services Expand, Led By Germany, France

February 05, 2012

(See EXT4 for more on Europe’s debt crisis.)

Feb. 3 (Bloomberg) -- European services and factory output strengthened in January, led by growth in Germany and France, as the region’s leaders work to find a solution to the debt crisis.

A euro-area composite index based on a survey of purchasing managers in both industries rose to 50.4 from 48.3 in December, London-based Markit Economics said in a report today. January’s reading is unchanged from an initial estimate on Jan. 24. A reading above 50 indicates expansion.

Finance ministers of the AAA rated countries using the euro -- Germany, Luxembourg, the Netherlands and Finland -- are set to meet today in Berlin as European leaders try to end the region’s debt crisis. With the turmoil undermining the recovery and global export demand cooling, European Central Bank council member Ewald Nowotny said on Jan. 30 that the euro area may fail to grow or show a “recession in certain phases” of this year.

Today’s data confirm that “business conditions stabilized following declines seen in the final four months of last year and that the region may avoid a slide back into recession,” Chris Williamson, chief economist at Markit, said in the report. “For the first quarter, gross domestic product for the region may well show a small gain.”

A composite gauge of euro-region of services rose to 50.4 in January, up from 48.8 in December.

European Unemployment

The economy may struggle to gather strength after expanding just 0.1 percent in the third quarter as governments from Ireland to Spain step up spending cuts to help restore investor confidence. European unemployment remained at the highest in almost 14 years in December, suggesting the region’s worsening debt crisis and cooling economic growth has prompted companies to cut jobs.

The euro-area economy will probably expand 0.3 percent this year after growing 1.6 percent in 2011, the ECB said on Dec. 8, when cutting borrowing costs a second time in as many months. The central bank has offered banks unlimited loans for three years to prevent a credit crunch.

Today’s gathering of finance ministers is part of a series of meetings convened by officials from the highest-rated euro states, a German Finance Ministry spokesman said, speaking on the customary condition of anonymity. Ministers will discuss current issues without briefing reporters after the meeting.

Greece is seeking a second international bailout, which European officials and Greek creditors say may be wrapped up in coming days. Luxembourg Prime Minister Jean-Claude Juncker said yesterday that Greek bond-swap talks with private creditors are “ultra-difficult,” and the steps to tackle the debt crisis adopted at a summit on Jan. 30 were “largely insufficient.”

Royal Philips Electronics NV, the world’s largest light bulb maker, said on Jan. 30 that it is “cautious” about prospects for 2012 after writedowns and sluggish sales helped spark its biggest loss in a decade. “Europe is not a great place for growth right now.” Philips Chief Executive Officer Frans van Houten said at the time.

--Editor: Patrick G. Henry

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


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