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Euro-Zone Business Activity Shrinks at Slowest Rate in 10 Months

02/05/2013 | 04:49am US/Eastern
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By Alex Brittain

Business activity in the euro zone shrank at its least severe rate in 10 months in January, adding to signs that while the crisis-hit economy is still weak, it may have passed its worst point.

Resilience in the currency bloc's economy was largely thanks to solid growth in Germany, a survey from data firm Markit showed Tuesday, whereas activity among French businesses fell at its sharpest rate in almost four years.

"The euro zone is showing clear signs of healing, with the downturn easing sharply in January and the region moving closer to stabilization in the first quarter," said Chris Williamson, Markit's chief economist.

The firm's composite Purchasing Managers' Index for the euro zone rose to 48.6 in January from 47.2 in December. The sub-50 reading means activity across the manufacturing and services industries was shrinking in January, but at the slowest rate in 10 months. Tuesday's results were better than a preliminary estimate of 48.2 published last month.

Evidence of German resilience in Tuesday's surveys is backed by polls of businesses in Europe's largest economy, which have strengthened sharply in recent months. Although other countries are yet to show similar signs of a rebound, strength in Germany could benefit the euro zone as a whole due to the countries' strong trade ties. If the bloc's economy does recover it would ease the burden on governments currently struggling to balance their public finances, and make it easier to resolve the debt crisis that has pushed several member states, including Greece and Portugal, to succumb to international bailouts.

Write to Alex Brittain at alex.brittain@dowjones.com

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