The eurozone recession eased at the end of the second quarter, opening hope of a return to growth in the second half of the year, final data from a key survey signalled yesterday.
The Markit Eurozone Composite Purchasing Managers Index registered 48.7 points in June compared with 47.7 in May.
This was the third monthly increase in a row and marked a 15-month high, albeit still below the threshold of 50 points indicating growth or recession.
The survey is closely watched as a leading indicator of activity.
"Euro area recession has extended into a record seventh consecutive quarter," said Markit chief economist Chris Williamson.
"However there is good reason to believe that the region is stabilising and on course to return to growth during the second half of the year."
He said it was "most encouraging" to see the Spanish economy contracting at the slowest rate for two years, Italy seeing business activity fall at the slowest pace since September 2011 and France's downturn also moderating to the weakest level since last August.
But he cautioned that with Germany barely growing it was "difficult to identify any real growth drivers", meaning that the pace of expansion across the 18-nation area "is likely to remain subdued until business confidence improves further."
Although the survey’s jobs index ticked up to 47.4 last month from May’s 47.2, that still suggests the jobless rate is likely to head higher.
The services PMI, which covers companies ranging from banks to restaurants, also rose in June and suggested companies are becoming a little more optimistic about the outlook.
It rose to 48.3 in June from 47.2 in May, trimmed slightly from the preliminary reading of 48.6.
The new business index jumped more than a full point in June, showing services companies are losing business at a far slower pace than they were even a month ago.
That is consistent with ECB president Mario Draghi’s claim that he expected the eurozone economy to start recovering in the second half of the year.
There are still deep problems, however. Eurozone unemployment is high at 12.1 per cent in May and youth unemployment is 23 per cent. The banking system also remains fragile.
The PMIs come on the back of strong industrial production figures for April. Rather than the decline analysts expected, the data released in mid June showed output in the bloc’s factories rose by 0.4 per cent after a rise of 0.9 per cent in March.
Besides joblessness, a lack of lending to businesses remains a black spot. ECB figures out last week showed companies still struggle to borrow.
The ECB may yet avoid more rate cuts. But the governing council could have to play a role, alongside the European Investment Bank and the European Commission, in spurring lending to smaller companies in the southern economies. The three authorities have been in discussions since May on initiatives to kick-start the market for securities backed by business loans.