Eurozone recovery hopes raised again

LONDON (AP) ? Further evidence emerged Tuesday that the economy of the 17 European Union countries that use the euro has started 2013 in better shape than many had expected.

Markit, a financial information group, said its purchasing managers' index for the eurozone economy ? a closely watched gauge of activity similar to that of the Institute for Supply Management in the U.S. ? rose to a ten-month high of 48.6 in January from 47.2 in December.

Though the index remains below the 50 mark that would indicate expansion, the survey echoes other findings that the eurozone economy may be over the worst. Both main pillars of the eurozone economy, manufacturing and services, are off their lows, according to Markit.

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

However, the eurozone 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.

Retail sales figures released Tuesday by Eurostat, the EU's statistics office, confirmed expectations that the eurozone will have remained in recession in the final quarter of 2012. Retail sales fell 0.8 percent in December from the month before, double market expectations.

December's decline was the fifth straight fall, clear evidence that households across the eurozone have battened down the hatches amid the recession. In Germany, the fall was even more marked at 1.7 percent, which could be enough to tilt Europe's biggest economy into a fourth quarter economic drop.

For 2012 as a whole, eurozone retail sales were 1.7 percent lower. Few economies in the world can eke out economic growth when a key engine such as household consumption, is performing so badly.

"Looking ahead, the likelihood is that eurozone consumers will remain pretty cautious in their spending for now at least, although at least some of the pressures on them are showing signs of easing," said Howard Archer, chief European economist at IHS Global Insight.

Overall, the figures of late are unlikely to prompt the European Central Bank to do anything more to help foster a recovery in the eurozone. Most economists expect it to maintain its benchmark interest rate at its record low of 0.75 percent when it wraps up its latest policy meeting on Thursday.

Source: http://news.yahoo.com/eurozone-recovery-hopes-raised-again-104042527--finance.html

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