Business grows in Euro-Area top four economies as recovery firms

(Bloomberg) — Business activity expanded in each of the euro area’s four largest economies for the first time in almost a year, signaling that a fragile recovery is slowly becoming more sustained.

A Purchasing Managers Index for the manufacturing and services industries across the region rose to a seven-month high of 53.3 in February from 52.6 the previous month, London-based Markit Economics said Wednesday. Similar gauges for Germany, France, Italy and Spain were all above the 50-point mark that divides expansion from contraction. The last time that happened was in April 2014.

Growth in the 19-nation euro economy is set to accelerate this year from a 0.3 percent expansion in the fourth quarter, benefiting from lower oil prices, a weaker euro and the European Central Bank’s 1.1 trillion-euro ($1.2 trillion) quantitative-easing plan. A stronger-than anticipated decline in unemployment and a less-than-forecast drop in consumer prices are contributing to improved prospects.

“The outlook has brightened for all countries,” said Chris Williamson, chief economist at Markit. “There were clear signs of the euro-zone economy reviving in February, with stronger inflows of new business and rising business confidence suggesting growth should continue to pick up in March.”

Economists in Bloomberg’s monthly poll forecast the euro-area economy will expand 0.3 percent in each of the first two quarters of 2015, and 0.4 percent in the following three-month periods through the third quarter of 2016, for annual growth of 1.2 percent this year and 1.6 percent next year.

First Quarter

First-quarter expansions in the region’s largest economies will range from 0.1 percent in Italy to 0.2 percent in France, 0.3 percent in Germany and 0.7 percent in Spain, Markit predicts on the basis of its survey data.

“With employment rising at the strongest rate for 3 1/2 years, unemployment should fall further from the 11.2 percent rate seen in January,” said Markit’s Williamson. “An easing in the rate at which companies cut their prices meanwhile also suggests that consumer-price deflation will continue to moderate.”

A gauge for the performance of euro-area services rose to 53.7 last month from 52.7, according to the release. On Monday, Markit reported that a similar index for manufacturing stood at 51, unchanged from January.

To contact the reporter on this story: Alessandro Speciale in Frankfurt at aspeciale@bloomberg.net