Euro zone businesses growth fastest since April 2011

Wednesday, 22 February 2017 00:00 - - {{hitsCtrl.values.hits}}

Employees use sewing machines as they work at the Royal Mer Bretagne factory, a specialist in French manufactured knitted clothes, in La Regrippiere, western France – REUTERS

Reuters: Eurozone private sector and manufacturing growth unexpectedly accelerated to near a six-year high in February and job creation reached its fastest since August 2007, propelled by strong demand and optimism about the future, a survey found.

IHS Markit’s eurozone flash composite Purchasing Managers’ Index, seen as a good overall growth indicator, rose sharply to 56.0, the highest since April 2011, from 54.4 in January, confounding expectations for a slight dip to 54.3.

The broad-based acceleration, which showed France’s momentum getting close to Germany’s, suggests that if sustained, economic growth could hit 0.6% in the first quarter, according to Markit.

That is faster than the 0.4% economists predicted in a Reuters poll earlier this month and suggests an economy in rude health before key national elections this year in France, Germany and the Netherlands. “The increased momentum is due to demand growing at a stronger rate, but also that upturn becoming more broad-based,” said Chris Williamson, chief business economist at IHS Markit.

“Importantly, what we now have is France joining the party. It’s been a laggard in the region, and a drag on the euro zone upturn for a few years ... and there are finally signs the drag is easing.”

The composite sub-index measuring employment, at 54.3, was the highest in more than nine years.

The renewed strength in the PMIs would also come as a welcome relief to the European Central Bank, widely expected to remain on the sidelines through upcoming national elections in three major economies in the currency bloc.

The euro zone flash manufacturing PMI rose to 55.5 from January’s 55.2, the highest since April 2011. New export orders also rose to a near six-year high of 55.5 from January’s 55.2, suggesting a weaker currency is helping boost demand.

The services PMI was also buoyant, with the business activity index rising to 55.6 from 53.7, easily beating the Reuters poll expectation of no change at 53.7 and the most optimistic forecast in the survey.

The services sub-index measuring incoming new business, at 55.8, was also the highest in nearly six years.