Fear of recession eases as Eurozone service sector grows

Africa Leader Friday 3rd February, 2012

LONDON - The eurozone's service sector has shown some growth, marginal though, for the first time in four months, raising expectations that a recession could be kept at bay.

The Markit eurozone services purchasing managers' index (PMI) was 50.4 in January, up from 48.8 in December. Any score under 50 represents a contraction. But Spain and Italy have continued to post trade decline.

It follows a manufacturing survey of 48.8, up from 46.9 in December.

The survey suggests a feared recession could be kept at bay, Markit said.

"The final eurozone PMI data indicates that business conditions stabilised following declines seen in the final four months of last year and that the region may avoid a slide back into recession," said Chris Williamson, chief economist at Markit.

The survey says the industry enjoyed its "strongest growth in a year" as businesses also hired workers at the fastest pace in almost four years.

Williamson said: "The situation is certainly a lot brighter than seen in the final quarter of last year, when the economy contracted 0.2 per cent and a slide back into recession is now looking increasingly unlikely."

"Much uncertainty persists, but this is nevertheless a far better start to 2012 than almost all were expecting to see."

The survey also found an increasing gap between the stronger eurozone economies, such as Germany, and weaker countries such as Spain.

The survey found growth hit a seven-month high in Germany and a five-month high in France, while ongoing downturns were seen in Italy, Spain and the Irish Republic. However, the rates of decline fell for Spain and Italy.