Eurozone business growth hits fastest this year; inflation up

UK services PMI hits 10-month high

LONDON, Dec 5, (RTRS): Eurozone business activity grew at its quickest pace this year in November and firms, which benefited from a weaker euro, raised prices faster than at any time in five years, a survey found on Monday.

Policymakers at the European Central Bank 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 final composite Purchasing Managers’ Index for the Eurozone was 53.9 in November, below a 54.1 flash estimate but beating October’s 53.3 and its highest since December.

The index has been above the 50 mark that divides growth from contraction since mid-2013.

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 from 52.8, below the flash 54.1 but its highest level this year. Manufacturers enjoyed their best month since the start of 2014 in November, a sister survey showed last week.

With activity picking up, the PMI points to fourth quarter economic growth of 0.4 percent, IHS Markit said, matching the prediction in a Reuters poll on Friday.

Activity in the German services sector hit a six-month high in November, supporting overall solid growth in the private 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 pickup 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 from 52.6.

Meanwhile, businesses in Britain’s dominant services sector grew at their fastest pace since January last month and the broader economy maintained momentum, even if firms have some worries about the year ahead, a survey showed on Monday.

Forecasts

The Markit/CIPS services purchasing managers’ index (PMI) — a closely watched gauge of the services sector — rose to 55.2 in November from 54.5 in October, beating all the forecasts in a Reuters poll of economists.

However, businesses reported the second-weakest level of optimism about the future in four years, due to the unexpected result of the US presidential election, the value of sterling and ongoing uncertainty about how Britain will leave the European Union.

Despite a dip in the equivalent survey of manufacturers published last week, overall the November PMIs suggest the economy as a whole will maintain the third quarter’s solid 0.5 percent growth rate through to the end of the year, Markit said.

“The pace of UK economic growth remains resiliently robust in the fourth quarter, despite ongoing uncertainty caused by Brexit,” said Chris Williamson, chief business economist at IHS Markit, the company that compiles the survey.

Most economists and the Bank of England (Boe) said Britain’s economy would slow sharply after June’s vote to leave the EU. But strong consumer demand and a boost to exporters from the heavy post-referendum fall in sterling have kept growth going.

A separate survey by manufacturing lobby EEF released earlier on Monday showed a boost in new orders and a better-than-expected recovery in output.