Brussels, Belgium (4E) – Business activity in the euro area expanded modestly in August for the second straight month, boosted by the robust performance by companies in some of the currency bloc’s struggling economies.
A survey of executives in euro-zone services and manufacturing firms showed the highest reading for business activity in more than two years, according to a report by data provider Markit released Wednesday. The composite purchasing managers index (PMI) climbed to 51.5 in August from the previous month’s reading of 50.5. A level above 50 indicates expansion in activity.
Wednesday’s results are further evidence that the euro-zone economy will continue to grow in the third quarter, following its emergence in the second quarter from a contraction that lasted 18 months, the longest in the history of the 17-nation bloc.
The rise is led by the advance in business activity in Germany, the euro zone’s largest and strongest economy, which grew to its fastest pace in seven months. French business activity declined.
The rebound, however, is expected to be soft as governments continue with austerity measures to keep their debts in check as well as businesses and consumers remain cautious of economic prospects. Cost of borrowing remains high for many countries and unemployment across the bloc is near all-time highs.
Despite signs of growth, the European Central Bank (ECB) is not expected to raise its benchmark interest rate any time soon because of questions about the resiliency of the euro-zone economy. The ECB’s next policy announcement is set on Thursday.