LONDON -- Further evidence emerged Monday that the economic recovery across the 17 European Union countries that use the euro is picking up and that unemployment may be peaking.
The composite purchasing managers' index -- a gauge of business activity across the manufacturing and services sectors published by financial information company Markit -- rose for the sixth month running to a 27-month high of 52.1 points in September from 51.5 in August.
That's further above the 50 threshold that indicates expansion and is the latest indicator to suggest the eurozone economic recovery is gathering pace. The rise was also bigger than anticipated -- the consensus of analysts' forecasts was for a far more modest rise to 51.7.
The increase was driven by faster growth of new business, while new orders increased for the second month running and rose at their fastest rate since the middle of 2011.
The eurozone is badly in need of economic growth following its longest recession since the single European currency was launched in 1999. In the second quarter of 2013, the eurozone grew by 0.3 per cent compared with the previous three-month period following six straight quarterly declines that pushed unemployment to a record of 12.1 per cent.
Analysts said the survey was particularly encouraging because the signs of the economic revival were not just confined to Germany, Europe's biggest and most robust economy.
"Although the upturn continued to be led by Germany, France saw the first increase in business since early 2012 and elsewhere growth was the strongest since early 2011," said Chris Williamson, Markit's chief economist. "Employment continued to fall, though it is reassuring that the rate of job losses eased to only a very modest pace, suggesting that employment could start rising again soon."
Despite the improving data backdrop and the decrease in tensions in financial markets over Europe's debt crisis, the eurozone economy still has a long way to go to fully recovery.
Mario Draghi, the president of the European Central Bank, was cautiously upbeat when addressing lawmakers at the European Parliament in Brussels on Monday. Though he confirmed there was a "slow recovery" in the third quarter, he said it still "needs to be firmly established."
He highlighted the need for lawmakers across Europe to set up a joint mechanism to unwind or restructure failing banks, part of a regional banking union. That would increase confidence in the banks and reduce fears that governments will face steep costs to bail them out in the future.
Tom Rogers, a senior economic adviser at Ernst & Young, said "more needs to be done in the coming months to nurture the recovery." He also highlighted the need for progress in creating the banking union, which would allow competitive firms in countries like Greece and Spain better access to finance.
The European Central Bank, which has cut its main interest rate to the record low of 0.5 per cent, should also "remain vigilant to any possible tightening of global liquidity conditions," Rogers said.
