Eurozone private sector rides to 2016 high – IHS Markit

Posted on November 23, 2016

No Trump-induced slump in the eurozone.

Businesses in the single currency area reported their best levels of activity of the year in November, driven by healthy growth in the services sector, according to an influential business survey.

“The pace of economic growth in the eurozone accelerated to the fastest so far this year in November”, said IHS Markit’s latest purchasing managers’ survey, which is a good indicator for official economic growth.

Markit’s composite gauge for the private sector climbed to 54.1 in November from 53.3 – an 11-month high, with the dominant service sector companies also enjoying their best month of the year to date. Any number above 50 indicates expansion.

Growth in the single currency area’s manufacturing sector slowed slightly but still enjoyed its second best month of the year, with the manufacturing PMI registering 54.1.

November’s figures suggest the eurozone has shrugged off any lingering side-effects from the UK’s Brexit vote in July or the election of Donald Trump earlier this month.

There are “plenty of signs that growth will continue to accelerate”, said Chris Williamson at IHS Markit, which compiles the flash estimate based on 85 per cent of replies to the survey.

He now expects the eurozone to grow by 0.4 per cent in the final quarter of the year, an acceleration from the third quarter’s 0.3 per cent.

The encouraging numbers come after Germany – the bloc’s largest economy – also reported a better than expected month for its service sector companies, driven by rising employment levels.

In good news for the European Central Bank, businesses also reported higher input costs for their goods this month, pointing to a pick up in overall inflation.

“Average prices charged for good and services showed the biggest rise for over five years, albeit with the rate of increase being very modest,” said Mr Williamson.

The ECB is widely expected to extend its unprecedented stimulus measures by six months at its December 8 meeting, as the eurozone economy faces still sluggish inflation more than 18 months into the QE programme.

“The ECB hasn’t given the all-clear sign on the recovery either, with Draghi stating that the expansion is still highly reliant on monetary policy stimulus”, said James Knightley at ING.

Chart courtesy of Bloomberg

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