Survey points to euro zone economic recovery

Updated: Tuesday, 05 Feb 2013 19:07

Further evidence emerged today that the euro zone economy has started 2013 in better shape than many had expected.

Markit, a financial information group, said its purchasing managers' index for the euro zone economy rose to a ten-month high of 48.6 in January from 47.2 in December.

The index is a closely watched gauge of activity in the sector.

Though the index remains below the 50 mark that would indicate expansion, the survey echoes other findings that the euro zone economy may be over the worst.

Both main pillars of the euro zone economy, manufacturing and services, are off their lows, according to Markit.

"The euro zone is showing clear signs of healing, with the downturn easing sharply in January and the region moving closer to stabilisation in the first quarter," said Chris Williamson, Markit's chief economist.

However, the euro zone economy continues to face a number of headwinds, not least related to the debt problems afflicting many of its members. In order to get their public finances into shape, many countries, including Greece, Italy and Spain have had to cut spending and raise taxes as well as pursue a raft of economic reforms that will take time to reap dividends.

There are also growing concerns over France, Europe's second-largest economy after Germany. Markit said its survey pointed to output in France falling at its fastest monthly rate since March 2009, when the world's major economies were deep in recession following the global banking crisis.

Meanwhile, retail sales figures released today by Eurostat, the EU's statistics office, confirmed expectations that the euro zone will have remained in recession in the final quarter of 2012.

Retail sales fell 0.8% in December from the month before, double market expectations. December's decline was the fifth fall in a row, clear evidence that households across the euro zone have battened down the hatches amid the recession.

In Germany, the fall was even more marked at 1.7%, which could be enough to tilt Europe's biggest economy into a fourth quarter economic drop. For 2012 as a whole, euro zone retail sales were 1.7% lower.

Few economies in the world can eke out economic growth when a key engine such as household consumption, is performing so badly. Overall, the more recent figures of late are unlikely to prompt the European Central Bank to do anything more to help foster a recovery in the euro zone.

Most economists expect it to maintain its benchmark interest rate at its record low of 0.75% when it wraps up its latest policy meeting on Thursday.