European Manufacturing, Services Growth Accelerates
Europe’s manufacturing and services industries expanded at the fastest pace in 22 months in October as evidence mounted that the global economy is pulling out of the recession.
A composite index of both industries in the euro-area economy rose to 53 from 51.1 in September, London-based Markit Economics said today. That was the highest since December 2007 and above the 51.6 that economists had projected, according to the median of 13 estimates in a Bloomberg News survey. A reading above 50 indicates expansion.
European companies are stepping up output to meet reviving orders after governments around the world spent $2 trillion in stimulus measures to fight the worst recession in at least six decades. The International Monetary Fund said on Oct. 1 that the global economy will expand at a faster pace than previously expected in 2010. Still, the euro’s ascent against the dollar may curb the recovery in Europe.
“The second half of the year will be relatively strong,” said Juergen Michels, chief euro-area economist at Citigroup in London. “Looking ahead, there are a lot of reasons for momentum to weaken partly because of a stonger euro.”
The world economy will shrink 1.1 percent this year, less than the 1.4 percent projected in July, the Washington-based IMF forecast. In 2010, the economy may expand 3.1 percent instead of a previously projected 2.5 percent, the fund said. In the euro region, the economy probably returned to growth in the third quarter, the European Commission forecast last month.
Global Recovery
Adding to signs of global recovery, German business sentiment improved to a 13-month high in October, the Ifo institute in Munich said today, citing a survey of 7,000 executives. Confidence in the world economy rose for a third straight month in October, a Bloomberg survey of users on six continents showed earlier this month. In the U.S., industrial output increased more than expected in September and China’s manufacturing expanded at the fastest pace in 17 months.
Wolfsburg, Germany-based Volkswagen AG, the biggest overseas carmaker in China, sold 150,000 cars last month, a monthly record, as sales for the first nine months surged 37 percent. Volkswagen is investing 4 billion euros ($6 billion) to expand capacity in China through 2011.
“China is the steam engine of the world economy,” Volkswagen sales chief Detlef Wittig said in a Sept. 25 interview in Frankfurt. “The lust for mobility there seems almost bottomless. We’re very well positioned there and will keep investing to secure our share of the market.”
Showing Expansion
In the euro-area economy, a services index rose to 52.3 in October from 50.9 in the previous month, today’s report showed. A gauge of manufacturing increased to 50.7 from 49.3, showing expansion for the first time since May 2008.
Hermes International SCA Chief Executive Officer Patrick Thomas said on Oct. 8 that luxury-goods brand sales are “booming” in China and elsewhere in Asia, while the U.S. market has turned “slightly positive.” Munich-based Bayerische Motoren Werke AG posted its first monthly sales increase this year in September on reviving demand.
“In the last three or four months, things have been significantly better than the first part of the year,” Francesco Trapani, chief executive officer of Rome-based Bulgari SpA, the world’s third-largest jeweler, said on Oct. 9. He said demand for watches has shown signs of improvement.
Bank Lending
The European Central Bank has cut its key rate to a record low of 1 percent and started buying as much as 60 billion euros of covered bonds to stimulate bank lending and boost investments and consumption. ECB President Jean-Claude Trichet said on Oct. 9 that it’s “not the time to exit yet” with the economy expected to show a “rather uneven” recovery.
The euro has appreciated around 7.5 percent against the dollar over the past five months, bringing annual gains to 6.9 percent. Dublin-based C&C Group Plc, the maker of Magners cider, on Oct. 8 reported a drop in first-half profit and said trading conditions have become “more challenging.”
Filed under: money by Specialist