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Eurozone Downturn Slows On German Recovery

Eurozone Downturn Slows On German Recovery

The downturn in Eurozone slowed in December as the German private sector returned to growth, while contractions in the rest of the region remain worrying, survey results from Markit Economics showed Friday.

The composite Purchasing Managers' Index rose to a nine-month high of 47.3 in December from 46.5 in November. A reading below 50 suggests contraction.

"The survey is still consistent with euro area GDP falling for the third successive quarter," said Chris Williamson, chief economist at Markit.

The flash services PMI climbed more-than-expected to 47.8 from 46.7 in November. The index was forecast to rise to 47 in December. The manufacturing PMI, at the same time, edged up to 46.3 from 46.2 last month. The expected reading was 46.6.

Output continued to fall in manufacturing and services, though in both cases the rate of decline showed signs of moderating. The pace of decline of new business moderated, but the easing was only marginal.

The rate of job losses, at the same time, slowed in December, hitting the lowest since August. A stabilization of headcounts in Germany contrasted with falling employment in France and elsewhere across the Eurozone on average.

In the face of broad-based weakness in demand, inflationary pressures remained muted in December. Input prices rose at a slightly stronger rate, but the rate of increase has shown little overall change over the past four months.

Final data from Eurozone confirmed an easing in inflation to 2.2 percent in November. The decrease largely reflected a slowdown in energy price growth to 5.7 percent from 8 percent.

Germany's private sector expanded after contracting for eight straight months, underpinned by service sector recovery. The flash composite output index came in at 50.5 in December, an improvement on November's 49.2.

The German services PMI rose to 52.1 from 49.7 in November. Economists had forecast the index to rise to no-change level of 50. On the other hand, the manufacturing PMI fell unexpectedly to 46.3 from 46.8 in the prior month.

Meanwhile, the Ifo institute on Thursday trimmed its 2013 GDP growth forecast to 0.7 percent from 1.3 percent. The think tank forecast the economy to contract in the fourth quarter of 2012, before staging a modest recovery in 2013.

Data today showed that the downturn in the French private sector output continued in December, but the rate of contraction slowed. The flash composite output index rose to 45, a 4-month high, from 44.3 in November.

The French services PMI climbed to 46, in line with expectations, from 45.8 a month ago. Likewise, the manufacturing PMI rose to 44.6 in December from 44.5 in November. The manufacturing PMI stayed slightly below the consensus forecast of 44.9.

Ernst & Young on Thursday said the Eurozone will shrink 0.2 percent next year. The firm expects euro area to enter 2013 with a brighter outlook than twelve months ago.

by RTT Staff Writer

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