ECONOMY

Europe’s PMI index rises

London (Reuters) – A eurozone manufacturers’ survey offered a glimmer of hope for the region’s economy yesterday, showing a return to growth in February for the first time since August as new orders reached their highest level in six months. Following surprise improvements in business sentiment in Germany, Italy and Belgium, the Reuters Eurozone Purchasing Managers’ Index crept above the 50 level that divides growth from contraction to 50.1 from 49.3 in January. New orders rose to 51.6 from 51.0 – partly due to the best growth in orders for two years in Germany, the region’s biggest and most sluggish economy. «It’s relatively encouraging,» said Susana Garcia-Cervero at Deutsche Bank in London. «There is improvement in business conditions, despite the fact that there is high uncertainty, so the economy is well equipped to grow as soon as that uncertainty disappears.» However, NTC Research, which compiles the Reuters surveys, said some manufacturing orders seemed to be driven by customers stocking up for fear that war would disrupt supplies and prices, «therefore raising questions about the sustainability of this growth.» Eurozone manufacturing has been stuck in contraction for much of the past two years, lagging behind an uneven recovery in the United States. The comparable US manufacturing index, compiled by the Institute for Supply Management, fell more than expected, to 50.5 in February from 53.9 in January. The European Central Bank meets on Thursday and is expected to cut its benchmark rate from 2.75 percent to protect business and consumer confidence against depressed share prices, worries about the financial sector and fears of war in Iraq. «The (PMI) numbers are encouraging and are consistent with some improvement in business confidence seen in the eurozone over recent weeks,» said Philip Shaw at Investec in London. «However, the eurozone economies remain mired in weakness and we still expect the European Central Bank to bring rates down later this week.» Yesterday’s manufacturing surveys showed the sector shrinking in Britain for the third straight month, with the main index slipping to 48.6 from a revised 48.7 in January. The Japanese survey also showed continuing business contraction. In the eurozone, the overall German manufacturing index edged up to 49.9 from 48.3 in January, while the main French index bounced back into growth at 51.5 from 50.0 in January. But Italian manufacturing growth slowed to 50.7 from 51.4. Output grew fastest in Austria, followed by France, Italy, Greece and Germany.