The euro zone Purchasing Managers’ Composite Index (PMI), beats expectations to rise to its highest level in four months. Markit’s Flash PMI, perceived to be a leading growth indicator, reported a jump to 50.4 in January from December’s 48.3.
The euro rose against the dollar after the data, climbing to a session high of 1.3061 from 1.3003 before the news at 09:00 GMT.
Since October, there has been a steady increase for three consecutive months, giving a signal that October was the bottom and we now beginning to see a turning point in the euro zone economy, giving optimism that the region may be able to avoid a recession.
The services sector PMI data came in at 50.5 beating expectations of 49.0 and a previous 48.8. Any number above 50 denotes an expansion and below indicates contraction. The surprising upturn in the service sector that outweighed the ongoing contraction in manufacturing, which remains below 50, coming in at 48.7, though higher than the previous 46.9.
“The index seems to have bottomed out in October and we’ve had three months of improvement. Three months we see as a turning point signal, and we are beginning to get a bit more confident,” said Chris Williamson, chief economist at data provider Markit.
“So it may not be a recession in the euro zone but a very brief period of decline.”
Meanwhile, Europe’s second largest economy, France, saw an increase in business activity in January to show growth for the first time in four months, according to French PMI data today.
Markit Economics reported France’s composite purchasing managers’ index ticked up to 50.9 in January from 50 in December, putting it above the 50 break-even threshold and indicating modest growth. This was helped by the services sector, where the PMI rose to 51.7 from 50.3. But manufacturing activity contracted again, with a reading of 48.5, down from 48.9 in December.