Euro zone Feb PMIs put business growth fastest in nearly six years - but inflation fears are on the rise

Record ID: 348040

  • Title: Euro zone Feb PMIs put business growth fastest in nearly six years - but inflation fears are on the rise
  • Date: 3rd March 2017
  • Summary: LONDON, ENGLAND UK (FILE) (REUTERS) SHOPPERS IN CENTRAL LONDON
  • Embargoed: 17th March 2017 13:58
  • Keywords: economy pmi inflation euro zone retail japan uk
  • Location: PARIS, FRANCE / LONDON, ENGLAND, UK / TOKYO, JAPAN
  • City: PARIS, FRANCE / LONDON, ENGLAND, UK / TOKYO, JAPAN
  • Country: Various
  • Topics: Economic Events
  • Reuters ID: LVA00666ENYJ1
  • Aspect Ratio: 16:9
  • Story Text: Activity in euro zone businesses grew at its quickest pace in nearly six years in February and job creation reached its fastest in almost a decade, driven by robust demand and exports, a survey found.
    IHS Markit's final composite Purchasing Managers' Index - seen as a good overall growth indicator - rose sharply to 56.0 in February from 54.4 in the previous month. It has not been higher since April 2011 and was unrevised from a flash estimate.
    A sub-index measuring employment rose to 53.8 from 53.4, its highest since October 2007. Firms also raised prices faster than at any time in nearly six years.
    A PMI for the dominant services industry jumped to 55.5 from 53.7 in January, just a tad below the earlier flash reading of 55.6.
    But other data shows retail sales in the 19 countries sharing the euro fell by 0.1 percent in January from December. The figure compared with market expectations of a 0.4 percent increase on the month.
    The European Union's statistics office Eurostat said year-on-year, the volume of retail sales grew 1.2 percent in January, lower than the 1.6 percent rise forecast by economists polled by Reuters.
    The figures, which are subject to revision, may indicate a reduced appetite for shopping in the euro zone, possibly caused by higher consumer prices, which could dent the bloc's economic recovery.
    Eurostat flash estimates released on Thursday said annual consumer inflation reached a four-year high in February, accelerating to 2.0 percent after a 1.8 percent rise the previous month, mostly driven by higher energy prices.
    "We might be on the cusp of fresh optimism pushing through into the broader economy," said IG Market Analyst, Chris Beauchamp.
    "But nonetheless, there are clear signs that a lot of the inflationary pressures that are coming through from energy and that will start to weigh on key parts like manufacturing, which could potentially derail some of the growth we've had."
    Japan's core consumer prices rose for the first time in over a year in January thanks to a pickup in energy costs, but a slump in household spending showed why economic growth and inflation have lagged the more ambitious goals set out by policymakers.
    Government data showed on Friday the core consumer price index (CPI), which includes oil products but excludes volatile fresh food prices, rose 0.1 percent in January from a year ago, posting the first increase since December 2015.
    But household spending slumped 1.2 percent in January from a year earlier, marking the 11th straight month of declines, a sign consumers are unconvinced that wages will increase.
    And slowing consumer spending started to hurt British services companies in February as growth cooled to a five-month low, an unpromising sign for the economy ahead of its divorce with the European Union, a survey showed on Friday.
    The Markit/CIPS UK Services Purchasing Managers' Index (PMI) fell to 53.3 from 54.5 in January, the weakest level since September and undershooting average expectations of 54.1 in a Reuters poll of economists.
    Some of the companies surveyed reported a pattern of cautious spending by British consumers, corroborating recent poor retail sales data that suggest a slowdown is underway despite the UK's robust economic performance after its Brexit referendum in June of last year.
    "The PMI number dropped to a five-month low but I think we should take that in the context of the spike we've had since the Brexit vote and the drop in sterling really pushing economic activity higher," said Beauchamp.
    "It is the big worry that a lot of the good news is in the price, if you like, where the UK economy is concerned."
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