Europe Manufacturing, Services Expand Most in More Than 2 Years

By Simone Meier

Jan. 6 (Bloomberg) -- Europe’s services and manufacturing industries expanded at the fastest pace in more than two years in December, indicating the euro-area economy is gathering strength.

A composite index based on a survey of purchasing managers in both industries in the 16-nation euro region increased to 54.2 from 53.7 in November, London-based Markit Economics said today. That matched an initial estimate published on Dec. 16 and the highest since October 2007. A reading above 50 indicates expansion.

The euro-area economy is gaining momentum after emerging from the worst recession in more than six decades amid a worldwide recovery. Manufacturing in the U.S., the world’s largest economy, expanded at the fastest pace in more than three years in December, while Chinese manufacturing grew at the fastest pace in five years. The European Central Bank said last month that the region may expand only at a “moderate pace” and show an “uneven” recovery.

“Euro-region growth could show a positive surprise in the first half of the year,” said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. “The ECB will probably start raising borrowing costs in the second half. We’re relatively optimistic about the outlook overall.”

The euro dropped against the dollar for a second day on speculation the European Union may be reluctant to help Greece as the country struggles to bolster its finances. The common currency was trading at $1.4358 at 9:05 a.m. in London, down 0.1 percent on the day after falling as much as 0.5 percent to $1.4284 earlier.

Euro-Area Manufacturing

An index of services rose to 53.6 in December from 53 in the previous month, Markit said. That was the highest since November 2007. A gauge of euro-area manufacturing increased to 51.6 from 51.2 in the previous month.

An index of the services industry in Germany, Europe’s largest economy, rose to 52.7 last month from 51.4 in November, Markit said today. An index of services for France fell to 58.7 from 60.9, while one for Italy increased to 53.9 from 49.8.

To contact the reporter on this story: Simone Meier in Dublin at smeier@bloombert.net