Tentative signs emerged in December that the eurozone economy may have passed the worst of its downturn, although a recovery still looks some months away, according to a newly released business survey.
The surveys bring some substance to the belief that the worst is over and a return to growth is in sight for the region in 2013
Markit’s Eurozone Composite PMI, which gauges business activity across thousands of companies, rose in December to 47.2 from 46.5 in November. The headline figure was revised down slightly from an initial reading of 47.3.
While lingering below the 50 line dividing growth from contraction for an 11th month, December’s reading was the highest since March last year. The decline eased among the services firms that make up the bulk of the eurozone’s economy, but manufacturers endured an awful end to 2012.
Survey compiler Markit warned that Friday’s figures would probably fail to prevent the eurozone’s recession deepening in the fourth quarter of last year, thanks to dismal figures in October and November.
“The surveys at least bring some substance to the belief that the worst is over and that a return to growth is in sight for the region in 2013,” said Chris Williamson, chief economist at Markit.
“The surveys rose to multi-month highs in all four of the largest euro member countries, suggesting that rates of decline eased in France, Italy and Spain, while the economic situation stabilised in Germany.”
As with last year, the eurozone economy’s fate hinges on the resolution of the sovereign debt crisis, which still smoulders despite the creation of financial firewalls from the European Central Bank and European Union.
German Finance Minister Wolfgang Schaeuble said last week he thought the worst had past for the debt crisis, although those words have been uttered by various European policymakers and politicians since mid-2010.
The outlook for the next few months is still very unclear.
The composite new orders index, which correlates closely with the next month’s main PMI reading, held steady at 45.0 in December, hinting at limited upside for January’s survey.
Service sector businesses became more optimistic about the year ahead in December, as Markit’s Eurozone Services PMI hit a five-month high of 47.8, up from 46.7 in November and unchanged from the preliminary reading.
The survey also brought mixed news on inflation pressures. While prices charged to consumers fell last month at a sharper pace, prices paid by companies for goods and services rose at the fastest pace since last March.