Euro Area Set for Robust 2016 Growth as Orders Fuel Hiring

  • Composite PMI rises to 54.3 in December from 54.2 in November
  • Gauge points to strongest growth in 4 1/2 years last quarter

The euro area has entered a year of solid economic growth that may see companies expanding capacity to meet increasing demand, Markit Economics said.

A Purchasing Managers’ Index for manufacturing and services unexpectedly rose to 54.3 in December from 54.2 in November, compared with a Dec. 16 estimate for a drop to 54, the London-based company said. The data suggest growth in the final quarter of 2015 was the fastest in 4 1/2 years, according to the report.

The economic recovery in the 19-nation euro area is picking up as unprecedented stimulus by the European Central Bank reaches companies and households. While inflation remains stuck far closer to zero than to the ECB’s goal of just under 2 percent, bank lending is improving and economic confidence is at the highest level in more than four years.

“The euro-zone economy starts 2016 on a solid footing and well placed to enjoy a year of robust expansion,” said Chris Williamson, chief economist at Markit. “It’s particularly encouraging to see firms taking on staff in increased numbers, suggesting that businesses are preparing for stronger demand in the coming year by boosting capacity.”

The euro extended its decline after the report and traded at $1.0729 at 10:35 a.m. Frankfurt time, down 0.2 percent.

Unemployment probably remained at 10.7 percent in November, the lowest level in almost three years, according to a Bloomberg survey ahead of a Jan. 7 Eurostat report.

In December, staffing levels rose in Germany, Italy, Spain and Ireland and were unchanged in France following three months of job cuts, Markit said.

The four economies are all enjoying strong expansions, while France is once again showing signs of stalling. A PMI for manufacturing and services in the region’s second-largest economy slipped to 50.1 in December from 51 in November, the lowest since January and just above the 50 threshold that divides expansion from contraction.

Economists predict the euro-area economy grew 0.4 percent from October to December. Eurostat will publish first data on Feb. 12.

“We believe the conditions for a relatively solid cyclical euro-zone upturn remain largely in place,” said Howard Archer, chief European economist at IHS Global Insight in London. “The ECB extended monetary stimulus in December, while fiscal policy is gradually becoming more growth-orientated with countries increasingly introducing stimulative measures.”

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