Business activity in the euro zone rose this month to a 27-month high, according to a survey of the zone’s purchasing managers by Markit Economics, a data and analysis firm based in London.
Germany, which has the largest economy in Europe, led the euro zone with strong new business and employment gains, according to the Markit survey. French purchasing managers also reported modestly improving business.
The report came on the heels of the election victory of Chancellor Angela Merkel in Germany. European stock markets and the euro currency were essentially unchanged, as investors took the widely expected election outcome in stride; only the large margin of Ms. Merkel’s success had been unexpected.
Ms. Merkel’s triumph and the fact that the anti-euro party Alternative for Germany fell short of the total needed to enter Parliament may allow her more freedom to address problems like the likelihood that Greece, Portugal and Slovenia will need additional bailouts. Germany also holds trump cards in crucial European discussions on banking oversight. But Germany’s own banks remain fragile.
Markit’s composite index of euro zone purchasing managers, which tracks sales, employment, inventory and prices, rose to 52.1 in September from 51.5 in August, the sixth consecutive monthly gain. Markit said new orders received by businesses accounted for the gain, rising at their fastest pace since June 2011.
James Howat, an economist with Capital Economics in London, wrote in a note that the data suggested a rise in quarterly growth of about 0.4 percent, after the second quarter’s gain of 0.3 percent, or 1.1 percent on an annualized basis.
While even a modest increase in growth would be welcome news for the battered European economy, a much more significant rebound will be necessary to address its unemployment crisis. More than 19 million people are without a job in the euro zone, according to Eurostat, the European Union statistical agency.
The zone’s economy had contracted for the six quarters before the April-to-June period, and Mr. Howat said that some recent data had been disappointing. The recovery remains “fragile,” he said.
While Germany’s economy is improving, the country’s central bank warned on Monday that German banks were still shaky.
As a group, German banks reported higher operating profit in 2012, the German Bundesbank wrote in its monthly report. But much of the improvement was the result of trading profits, which are subject to large fluctuations, the Bundesbank said.
The better overall result “should not obscure the fact that the German banking industry remains in a complex state of conflict,” the Bundesbank said. Banks must find a balance between the need for profitability and the need to build more sustainable businesses, it added.
While there is no shortage of credit in Germany, banks like HSH Nordbank in Hamburg and Commerzbank in Frankfurt remain burdened by exposure to loans to the troubled shipping industry and other problems. As a group, German banks are among the most highly leveraged in the world, which could make them vulnerable to financial shocks.
Jack Ewing contributed reporting from Berlin.