Euro area economy stabilized in August

[August 21, 2009]  LONDON (AP) -- Further evidence emerged Friday that the 16 countries using the euro are on the verge of growing again following the most savage recession since the Second World War.

Financial information company Markit said mounting optimism helped its composite purchasing managers' index -- a broad gauge of business activity -- for the euro zone rise by a record three points in August to 50.

The increase suggests that economic output in the euro zone has at least stabilized -- 50 marks the inflection point between expansion and contraction.

Markit suggested the services sector is nearly growing again. Its PMI swelled to 49.5 in August from 45.7 in July. And the manufacturing sector looks to be on the mend too -- its PMI increased to 47.9 from 46.3.

Though the figures are liable for revision when more detailed numbers are released in early September, they provide clear evidence that the economic conditions in the euro zone are improving fast.

They also come just a week after the surprising news that the recessions in Germany and France, the euro zone's two largest single economies, have ended. Both posted modest 0.3 percent increases in output in the second quarter.

Despite the clearly improving picture, analysts cautioned about expecting too much of a rebound in growth.

"The upshot is that the worst of the downturn certainly now appears to be over and the economy might even be beginning to expand again but with export growth unlikely to rise particularly sharply in the near term and domestic demand still fragile, a strong V-shaped recovery appears unlikely," said Ben May, European economist at Capital Economics.

[Associated Press]

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