LONDON – Manufacturers across Europe are starting to scent victory in their battle against recession, but businesses in Italy and some of the region’s smaller economies look closer to recovery than Germany. Surveys published yesterday, covering eight of the 12 eurozone countries and four outside the bloc, showed demand for manufactured goods was still shrinking in much of the region in January, but at a markedly slower pace than late last year. In Greece and Sweden, manufacturers reported business was growing overall. And in Italy and Ireland, manufacturers said output and new orders had started growing again – a strong indication that other measures of activity, such as employment and stocks of purchases, should soon start growing too. «The Italy figure is the most promising, it’s the first one (in the eurozone) which has really made a turn,» said Ditmer de Vries at Rabobank in Utrecht. «For the other economies there is still some way to go… Germany, of course, is holding back the recovery of Euroland, being the laggard.» The 12 indices published yesterday all use 50 as the dividing line between growth and contraction. The Reuters Eurozone Purchasing Managers Index, compiled by NTC Research, rose to 46.2 from 44.1 in December, showing the pace of contraction in the bloc’s manufacturing sector was slowing for the third month running. But there were marked variations among the eight countries covered by the NTC survey – Germany, France, Italy, Spain, Ireland, Austria, Greece and the Netherlands. The turning point still looks some way off for Europe’s dominant economy, Germany, where the index rose to 44.3 from 43.5. «Employment fell at the sharpest rate in the survey history, with temporary staff again bearing the brunt of staff cut-backs,» said NTC’s German report. But the German output index rose to 46.7, its highest level since August 2001, in one of several signs that European business sentiment is starting to recover form the shock of the September 11 attacks on the United States. «Those firms who saw orders rise attributed the increase to the placement of contracts that had been postponed toward the end of last year,» NTC said. Manufacturing accounts for about one quarter of German economic output, compared with less than one fifth in Britain, Europe’s second biggest economy. The UK index crept up to 46.4 from 45.2 in December while the orders index rose to 47.7, its highest level since last May. «What’s encouraging in the (UK) report…is that the new orders (index) continues to tick up…the overall number is modestly rising,» said Arjun Mittal at American Express Bank. Price deflation But, he added, «You have immense price deflation for manufacturers across the world. This sort of process is going to continue for the next year or so because there’s just a tremendous amount of excess capacity in a lot of manufacturing industries. Profits…are going to stay under pressure.» In Italy, the seasonally adjusted PMI was 49.1 in January, up sharply from 46 in December, but better domestic demand helped push output and new orders just above the 50 line. In France, the index bounced to 45.8 from 42.9. «Falls in new orders, new export orders and output were considerably more moderate that in December, and pointed to a virtual recovery from the short-term effects of the events of September 11,» NTC said. But as in other parts of Europe, French manufacturers were still cutting jobs as they struggled to make profits. «Many companies signaled that they had ceased to employ any temporary and short-term contract staff,» NTC said. The Spanish index jumped to 47.6 in January from 43.9 in December, while in Ireland, the PMI rose to 49.3 from 47.7 in December, its highest level for six months. «It is now clear that the slowdown in Irish manufacturing activity hit bottom in October and recovery is under way,» said Dermot O’Brien at NCB Stockbrokers. Sept. 11 fears recede As for Greece, its manufacturers have largely escaped the shrinkage in business that has gripped the eurozone as a whole for the past 10 months. The January index nudged up to 51.0 from 50.9 in December, after a brief contraction at 49.2 in November. «Growth in new orders rose with exports, making it the strongest showing since July 2001 as buyers from abroad regained lost confidence after the shocking events of September,» said NTC and the Hellenic Purchasing Institute. But the Austrian index rose to just 44.5 from 43.7 in December. «Despite first signs that a bottom is being established, Austrian industry remains in a period of recession,» said Stefan Bruckbauer of Bank Austria Creditanstalt. The Dutch index also rose only moderately, to 45.7 from December’s 43.8. The last growth reading was in March 2001. Outside the eurozone, the Swiss SVME index jumped to 46.2 from 41.5, while the Danish index, produced by purchase and logistics group Dif, bounced to 49.9 from 44.5. And Sweden’s seasonally adjusted PMI rose to 52.2, the highest level since May 2001, from 48.7 in December. «Three months in a row with rising index numbers indicate that industry’s cyclical trough may be behind it,» said purchasing and logistics lobby I&L and Swedbank.