- Title: Euro zone business grows at fastest rate this year in November - PMIs
- Date: 23rd November 2016
- Summary: UNKNOWN, FRANCE (FILE) (REUTERS) VARIOUS OF PEOPLE SAT OUTSIDE CAFE UNKNOWN, ITALY (FILE) (REUTERS) VARIOUS OF FOOD BEING PREPARED IN ITALIAN CAFE
- Embargoed: 8th December 2016 12:24
- Keywords: Euro zone business grows fastest rate year November PMIs
- Location: LONDON, ENGLAND, UK + UNKNOWN LOCATION + ITALY + FRANCE + SPAIN
- City: LONDON, ENGLAND, UK + UNKNOWN LOCATION + ITALY + FRANCE + SPAIN
- Country: Various
- Topics: Economic Events
- Reuters ID: LVA00559NZXQL
- Aspect Ratio: 16:9
- Story Text: Euro zone business expanded at the fastest rate this year in November, thanks to strong activity at manufacturers and a spike in new orders, even as firms generally held prices steady, a survey showed on Wednesday (November 23).
The strong run of data offers some hope that the economy may be at the start of a more solid cyclical upturn and will be welcome news for the European Central Bank, which is still likely to announce next month an extension to its massive stimulus programme.
IHS Markit's euro zone flash composite Purchasing Managers' Index, seen as a good overall growth indicator, jumped to 54.1 from October's 53.3, the highest reading this year and just shy of last December's 54.3. It was far above the 50 point line indicating growth in activity.
Only one of the 29 economists surveyed by Reuters had a higher forecast than the November print.
A separate Reuters poll last week predicted fourth-quarter growth will be slightly lower at 0.3 percent, while inflation will average 0.2 percent this year and 1.3 percent in 2017, much lower than the ECB's 2 percent target ceiling.
"We have begun to turn a corner. Some of the stimulus measures are taking effect. The weakness of the euro is a big part of it as well. For manufacturers, it's an exporting boost. We don't know how long we can guarantee that that's going to last. I believe that the euro is certainly due for a rebound, which will certainly take it back to 1.10, maybe 1.12 against the dollar," said Ken Odelunga, Market Analyst, City Index.
In the composite PMI survey, a sub-index measuring new business shot up to 53.8 from 52.9, its highest since December 2015.
The bloc's dominant services industry also performed much better than expected, smashing even the highest forecast in a Reuters poll. Similar to the composite number, its PMI came in at a 11-month high of 54.1, up sharply from October's 52.8.
That came despite unchanged output prices, only the second time in the past 14 months when companies did not resort to discounting to drum up new business.
Euro zone inflation has risen in baby steps in recent months, hitting 0.5 percent in October, and if the trend of strengthening price pressures continues, it could dampen expectations of further policy easing from the ECB.
The surge was in part due to a spike in incoming orders that stretched firms' capacity to its highest since mid-2011, suggesting activity could remain elevated as businesses run through the volume of work.
"There's an implied rush to get things done before Brexit happens. There's a rush perhaps to cement relationships in the best way that you can in view of the changing nature of the trading relationship between the United Kingdom and the euro zone," added Odelunga.
Manufacturers had a strong run as well this month due to robust demand. The factory PMI climbed to 53.7, its highest since January 2014, above the poll median and October's 53.5.
The output sub-index, which feeds into the composite PMI, nudged down to 54.1 from 54.6.
Following Britain's vote to leave the European Union in June, there were concerns that euro zone businesses would take a hit - something Dobson at IHS Markit says is yet to happen. - Copyright Holder: FILE REUTERS (CAN SELL)
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