Euro-Area Activity Accelerates to Fastest Pace Since Early 2011

Updated on
  • Composite Purchasing Managers’ Index rose to 58.1 in December
  • Momentum could bolster case for ECB to end bond purchases

Morgan Stanley's Sheets Sees Euro Rallying to $1.25

Economic activity in the euro-area accelerated to the fastest pace in almost seven years as services surged while factories benefited from booming domestic demand and near-record growth in export orders.

A composite Purchasing Managers’ Index for manufacturing and services rose to 58.1 in December from 57.5 a month earlier, beating expectations, data from IHS Markit showed. Growth momentum was the strongest in Ireland with France coming second, while activity in Germany reached its highest level in almost seven years.

The report suggests the euro-zone economy is getting a strong start to 2018 after last year enjoying what was probably its best expansion in a decade. The sustained growth momentum could give the European Central Bank more evidence for removing monetary stimulus if it helps fuel an upturn in inflation.

While prices eased in December, pressures should continue to build in the coming months as demand appears to be outstripping supply for many goods and services, said Chris Williamson, chief business economist at IHS Markit.

“A big question for 2018 will therefore be whether relatively high unemployment and spare capacity in many countries will continue to hold down pay growth and keep a ceiling on consumer price inflation,” he said.

— With assistance by Catherine Bosley

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