Euro zone growth loses momentum in October
LONDON: The euro zone’s economy lost some energy last month but growth remained strong and firms were able to pass on more of their costs to consumers as pricing power increased, a survey showed on Monday.
IHS Markit’s final composite Purchasing Managers’ Index for the euro zone fell to 56.0 last month from September’s 56.7, pipping an earlier flash estimate of 55.9 and comfortably above the 50 mark that separates growth from contraction.
“The euro zone growth spurt retained strong momentum at the start of the fourth quarter. With new business growth ticking higher, November should also prove a good month for business activity,” said Chris Williamson, chief business economist at IHS Markit.
Williamson said the PMIs point to euro zone economic growth of 0.6-0.7 per cent in the closing quarter of 2017, better than the 0.5 per cent predicted in a Reuters poll last month. ECILT/ EU New orders growth accelerated despite firms increasing their prices at the joint fastest rate since the middle of 2011. The output price index rose to a seven-month high of 53.1 from 52.7.
“Some price rises merely reflect the pass-through of higher costs, but companies are also reporting stronger pricing power as demand conditions continue to improve, which suggests underlying inflationary pressures are becoming more engrained,” Williamson said.
Robust growth alongside increasing price pressures will be welcomed by policymakers at the European Central Bank who last month took a step towards weaning the euro zone off loose money.
A PMI covering the bloc’s dominant service industry fell to 55.0 from 55.8, ahead of a preliminary reading of 54.9 and offsetting the strongest month in almost seven years for manufacturers.