Euro-area activity surges to fastest pace since 2011


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

A composite Purchasing Managers’ Index (PMI) 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.

The UK services industry grew faster than economists expected in December, capping a resilient final quarter of 2017.

IHS Markit’s PMI rose to 54.2 from 53.8 in November, beating the reading of 54 predicted by economists.

Taken together with surveys on manufacturing and construction, it suggests the economy grew between 0.4% and 0.5% in the fourth quarter, broadly maintaining the pace of the previous three months, Markit said yesterday.

The pound strengthened 0.2% to US$1.3539 as of 9:45am London time yesterday.

However, price pressures remain a challenge for companies and uncertainty over Brexit is weighing on investment, casting doubt over whether the economy can maintain its momentum, Markit warned.

Demand rose at the slowest pace in 16 months.