Euro zone PMI picks up to best this year

BUSINESS activity in the euro zone grew at its quickest pace this year in November and firms, helped by a weaker euro, raised prices faster than at any time in five years, a survey found yesterday.

Policymakers at the European Central Bank (ECB) this week are expected to announce a six-month extension to their asset purchase programme to try to boost inflation, further denting the currency and offering support to exporters.

IHS Markit’s composite Purchasing Managers’ Index (PMI) for the euro zone was 53.9 points last month, below a 54.1 point flash estimate, but beating October’s 53.3 points, its highest since last December. The index has been above the 50 point mark that divides growth from contraction since mid-2013.

“The composite PMI was revised down slightly, but it’s still consistent with a pick-up in euro-zone gross domestic product growth, which is quite positive,” said Stephen Brown at Capital Economics.

Adding to the more upbeat picture, retail sales rose more than expected in October, official data showed earlier.

The PMI for the dominant services industry jumped to 53.8 points from 52.8 points, below the flash 54.1 points, but its highest level this year. Manufacturers enjoyed their best month since the start of 2014 in November, a survey showed last week. With activity picking up, the PMI points to fourth-quarter economic growth of 0.4 percent.

Activity in the German ser- Years of ultra-loose monetary policy have so far failed to get inflation anywhere near the ECB’s target. vices sector hit a six-month high in November, supporting overall solid growth in the pri- vate sector and adding to signs that Europe’s largest economy has rebounded in the current quarter.

France’s recovery extended into a fifth month, and growth accelerated in both Spain and Italy.

New orders also jumped, suggesting the pick-up may continue through to the end of the year. The new orders index for the service industry climbed to a 10-month high of 53.5 points from 52.6 points.

Years of ultra-loose monetary policy have so far failed to get inflation anywhere near the ECB’s close-to-2-percent target, but pressures are mounting slowly. The composite output price index rose to 50.6 points from 50 points, its highest since August 2011.

“It has been rising, but it’s not consistent with a rise in core inflation, so we still think that the ECB will extend purchases when it meets on Thursday,” Brown said. – Reuters