A key index of services business activity staged its biggest one-month rise since December 2001 and firms were even more optimistic about the future, suggesting the worst phase of a severe recession has probably passed.
Markit unexpectedly revised up its services business activity index to 43.8 compared with a flash reading of 43.1, indicating the slowest pace of contraction in six months for a sector covering everything from financial services to airlines.
The figure was well above the 40.9 in March, but still below the 50 mark that divides growth and contraction.
The rate of contraction slowed in all four of the biggest euro zone countries and to the slowest in nearly a year for Spain.
The survey of 2,000 companies also revealed businesses as a whole had their brightest outlook since June, before the latest leg of the financial crisis set in, catapulting the world economy into its worst recession since World War Two.
Analysts were convinced that the figures suggested the worst had passed but they were not universally optimistic that better times were straight ahead, still calling for another 25 basis point European Central Bank interest rate cut tomorrow.
“We're off the lows but still shrinking, albeit at a slower pace in Q2 versus Q1,” noted Kenneth Broux, economist at Lloyds TSB Corporate Markets.”
"The glass is half empty, not half full.” The figures came before news that the comparable UK survey pointed to the slowest pace of contraction in eight months and a similar bounce in business expectations. Financial markets shrugged off the euro zone figures.
The euro zone composite PMI, which includes manufacturing figures released on Monday which also were revised higher, rose to 41.1, also its highest since October, from 38.3 in March.
That pointed to a milder rate of economic contraction than the expected 1.9 per cent rate expected in the latest Reuters poll for the first three months of the year. The economy contracted by 1.6 per cent in the final months of 2008.
The upwardly-revised 54.4 reading for services business expectations from 48.6 the prior month was the biggest one-month rise in this index since January 2002.
That is likely to further encourage optimists who expect the economy to grow again later this year - although the index registered 58.7 in April 2008 and completely missed the worst recession in generations unfolding in months afterward.
Business expectations were the rosiest in 15 months for Spain, and the brightest in 10 months for both Germany and France. They hit an eight-month high in Italy.
Even the index measuring incoming new services business rose more than a full point compared with the flash estimate. That suggested that the pace of decline had narrowed in most euro zone countries, even though orders deteriorated even more sharply in Germany.
Reuters