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European Manufacturing, Services Grow Most Since 2007

April 7 (Bloomberg) – Europe’s services and manufacturingindustries expanded at a faster pace than initially estimated in March as companies stepped up output to meet global orders.

A composite index based on a survey of euro-area purchasing managers in both industries rose to 55.9 from 53.7 in February, London-based Markit Economics said today. That’s the fastest pace since August 2007 and above an initial estimate of 55.5 published on March 24. A reading above 50 indicates expansion.

A global recovery is gaining momentum led by surging Asian economies, boosting earnings at companies including Hochtief AG, Germany’s largest construction company. While European economic confidence rose to the highest in almost two years last month, increasing unemployment may keep a lid on consumer spending.

“There’s a positive manufacturing dynamic, but levels are still weak,” said David Kohl, deputy chief economist at Julius Baer Holding AG in Frankfurt. “While the focus is on Asia, exports alone probably won’t be enough to sustain a recovery.”

The euro pared its decline against the dollar after the data, trading at $1.3389 at 10:07 a.m. in London, down less than 0.1 percent on the day.

An index of services, which account for about 60 percent of the region’s gross domestic product, rose to 54.1 in March from 51.8 in the previous month, Markit said. That’s above the initial estimate of 53.7 and the fastest pace of expansion since November 2007. A gauge of manufacturing increased to 56.6 from 54.2.

Global Recovery

Asian economies are leading a worldwide recovery from the worst slump since World War II. The International Monetary Fund forecasts the global economy will grow 3.9 percent this year after a 0.8 percent contraction in 2009, with China expanding 10 percent, almost five times the pace projected for the U.S. The euro-area economy may grow 1 percent, the IMF forecast.

The euro’s 6.4 percent slide against the dollar this year is helping bolster the region’s exports by making them more competitive abroad. In Germany, Europe’s largest economy, business confidence rose more than economists forecast in March.

Essen, Germany-based Hochtief on March 25 forecast further earnings growth this year after surging Asian demand boosted orders in 2009. Munich-based Bayerische Motoren Werke AG, the world’s largest maker of luxury vehicles, last month forecast higher 2010 deliveries with Chinese sales projected to show a “strong double-digit” percentage gain.

Still, the euro-region economy may struggle to gather strength after a near stagnation in the fourth quarter as companies continue to eliminate jobs, undermining consumers’ willingness to spend. European unemployment rose to 10 percent in February, the highest since August 1998.

Silk Ties

Henkel AG, the German maker of Loctite glues, said on March 26 that it aims to generate the majority of its adhesives sales from emerging countries within the next three years. Hermes International SCA, the French maker of luxury handbags and silk ties, said on March 25 that it expects revenue to grow at least 5 percent this year after reviving demand in emerging markets helped boost sales in the fourth quarter of 2009.

The European Central Bank tomorrow will probably keep its benchmark interest rate at a record low of 1 percent to bolster a recovery, according to a Bloomberg News survey. The Frankfurt- based central bank, which has started phasing out some of its emergency measures, will announce its decision at 1:45 p.m.