European economic survey in surprise improvement
LONDON (AP) — A stronger than anticipated economic survey Thursday helped shore up European markets following a run of disappointing news that raised the specter of another recession across the 18-country eurozone.
Financial information company Markit said its composite purchasing managers' index for the eurozone — a gauge of business activity across the manufacturing and services sectors — rose to 52.2 points in October from 52.0 in September. Anything above 50 indicates expansion.
The rise was unexpected, with most analysts anticipating a modest decline. Though the increase has not eliminated fears of another downturn, it helped stocks across Europe rally — the Stoxx 50 index of leading European shares was up 0.8 percent. The euro was also solid, rising 0.2 percent to $1.2655.
The response in the markets has been positive because traders have become increasingly accustomed to a steady diet of grim economic indicators.
"The rise comes as a slight relief after a run of bad news," said Jennifer McKeown, senior European economist at Capital Economics.
Still, McKeown thinks it's still possible that the region could be heading for recession, noting that the survey was "over-optimistic" in the first two quarters of the year. Figures next month are expected to show the eurozone grew modestly in the third quarter after recording no growth in the second.
The overall increase in Thursday's survey was largely due to an improvement in Germany, particularly its manufacturing sector. It also came despite further evidence of a sluggish French economy. Business activity in Europe's second-largest economy fell for a sixth successive month and deteriorated at the fastest rate since February.
"While the survey suggests the euro area has so far avoided a slide back into recession this year, a renewed downturn cannot be ruled out," said Chris Williamson, Markit's chief economist. "Growth is so anemic that increasing numbers of companies are being forced into laying off staff and slashing prices in an attempt to cut costs and boost sales through discounting."