Report Raises Hopes for Euro Zone Recovery

FRANKFURT — The long-suffering euro zone may be slowly emerging from recession, as manufacturers in Germany and France begin to ramp up production to meet stronger demand, according to a closely watched report published on Wednesday.

The survey of purchasing managers by Markit, a data provider, suggested that Europe may be near the end of a prolonged slump that has pushed unemployment to record highs. But the recovery is likely to be slow and fragile, economists warned, and recession could persist in some countries in Southern Europe.

There were also signs on Wednesday that a credit crunch in the euro zone is easing. A survey of banks by the European Central Bank showed that credit for consumers was becoming more available for the first time since the financial crisis began in 2008. While credit for business remained tight, there were tentative signs that lending could begin to recover in coming months.

“The recession in the euro zone seems to be coming to an end after two years,” Ralph Solveen, an economist at Commerzbank in Frankfurt, said in a note to clients. But he added that the upturn could be uneven, with some indicators continuing to fall in coming months. “Activity is still dampened by numerous problems,” he wrote.

The Markit index of economic output rose to its highest level in 18 months, to 50.4 in July from 48.7 in June, according to preliminary figures. A reading above 50 is considered a sign that the euro zone economy is growing. It was the first time the index was above 50 since January 2012.

European stocks rose after release of the survey. Benchmark indexes in Frankfurt, Paris and Rome were all up more than 1 percent in early afternoon trading, while the euro gained slightly against the dollar.

The Markit index suggested that growth is picking up in Germany and that France is close to exiting recession. Manufacturing is rebounding in both countries, perhaps aided by growth in the United States economy, which has increased demand for European exports.

Daimler, the maker of Mercedes cars, said Wednesday that unit sales of passenger vehicles rose 9 percent in the second quarter of 2013, in part because of surging demand in the United States for models like its redesigned S-Class luxury sedan.

The Markit survey showed that the French economy continues to contract overall, but at a slower pace, while manufacturing is growing again for the first time since February 2012. The data suggest that the French economy, the second-largest in the euro zone after Germany, is stabilizing and could emerge from recession soon.

In Germany, managers reported solid growth in both manufacturing and services, raising hopes that the country could help haul the rest of the Continent out of its slump.

Markit did not issue separate data for other European countries, but an index of economic sentiment in the rest of the euro zone that was part of the report also showed signs of stabilization.

The various encouraging data probably mean the European Central Bank is not likely to cut the benchmark interest rate, already at a record low of 0.5 percent, when it meets next week. Unemployment, often one of the last problems to respond to economic growth, could be near its peak after reaching 12.2 percent in the euro zone, its highest ever.

Still, the region remains vulnerable. More than a quarter of all workers are unemployed in Greece and Spain. Signs of slowing growth in China, which accounts for about 25 percent of European exports, also present a risk for the euro zone.

“An economic recovery is looming, which is encouraging,” Martin van Vliet, an economist at ING Bank said in a note, “but we still doubt whether the region is about to embark on a sustainable recovery.”

The International Herald Tribune