Europe Services, Manufacturing better then expected in January

Europe’s manufacturing and service industries contracted for an eighth month in January as the global recession curbed demand for exports and damped spending.

A composite index of both industries was at 38.5 compared with 38.2 in December, which was the lowest reading since the survey began in 1998. Economists forecast a decline to 37.4, according to the median of 15 estimates in a Bloomberg survey. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates contraction.

Companies are scaling back production and cutting jobs as global demand wanes. Europe’s gross domestic product will drop 1.9 percent this year, the European Commission forecasts.

While the rise in the purchasing managers’ index “provides a glimmer of hope that the rate of economic contraction may have peaked at the end of last year,” its level is “still consistent with a sharp drop in GDP,” said Chris Williamson, chief economist at Markit.

Markit said its manufacturing index was at 34.5 after reaching a record low of 33.9 in December. The services index rose to 42.5 from 42.1.

“The collapse in manufacturing activity is going to be the key factor behind extremely weak fourth-quarter and first-quarter GDP numbe

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