Eurozone private sector ended the year on a high note, riding on the back of the manufacturing upturn that offset a slowdown in services, despite rising costs.
The Composite Purchasing Managers' Index, which combines manufacturing and services, was unchanged at 53.9 in December, preliminary survey data from IHS Markit showed Thursday. Economists had forecast a score of 53.9.
A PMI reading above 50 suggests growth in activity.
The flash Eurozone Manufacturing PMI climbed to 54.9 from 53.7 in November. The reading was the highest since April 2011 and came in above economists' forecast of 53.7.
The manufacturing output index rose to 56.1 from 54.1 in November.
In contrast, the flash Eurozone Services PMI fell to a two-month low of 53.1 from 53.8 in November. Economists had predicted a score of 53.8.
"While the December PMI surveys put the Eurozone economy on a strong footing to start 2017, there is clearly the potential for political uncertainty to derail growth as elections loom in the Netherlands, France and Germany, and Brexit discussions begin," IHS Markit economist Chris Williamson said.
"The PMI indicates that business activity has risen at the fastest rate so far this year in the fourth quarter, signalling GDP growth of 0.4 percent."
Among different components of the composite PMI, new business, employment and backlogs of work grew at rates similar to November, suggesting that firms continued to expand capacity to meet stronger demand, especially in manufacturing.
The improvement in the manufacturing PMI was partly due to a weaker euro, the survey found. December saw the biggest monthly increase in output since April 2014. Growth of new orders and employment accelerated. Further, growth in new orders and exports was the biggest for over five-and-a-half years.
Despite a slowdown, service sector firms' expectations of activity in the year ahead surged to an eight-month high as they expect growth to pick up next year.
Meanwhile, price pressures intensified further in December with a mix of higher import costs due to a weaker euro and rising global commodity prices pushing average input price inflation to the highest in five-and-a-half years.
Input prices for manufacturers showed the biggest jump since May 2011, while service providers saw the biggest increase in costs for four years, in part driven by higher fuel and oil prices.
Consequently, selling prices for goods and services rose at the steepest rate for nearly five-and-a-half years as firms passed higher costs on to customers.
Survey data suggest that capacity is being strained by the recent rise in demand and such capacity shortages tend to spill over into higher prices in following months, IHS Markit said.
Eurozone private sector growth continued to be led by Germany. The German composite PMI dropped to a three-month low of 54.8 from 55.0 in November. The services measure slid to 53.8 from 55.1, while the manufacturing index climbed to a 35-month high of 55.5 from 54.3.
France's private sector expanded at the fastest pace in one-and-a-half years in December, The composite PMI rose to an 18-month high of 52.8 in December from 51.4 in November. The manufacturing measure improved to a 67-month high of 53.5 and the services index climbed more-than-expected to 52.6.
by RTT Staff Writer
For comments and feedback: editorial@rttnews.com
Economic News
What parts of the world are seeing the best (and worst) economic performances lately? Click here to check out our Econ Scorecard and find out! See up-to-the-moment rankings for the best and worst performers in GDP, unemployment rate, inflation and much more.
