Eurozone businesses began 2018 by increasing activity faster than at any time in well over a decade as new orders surged despite firms raising prices at the steepest rate in almost seven years, a survey showed.
The eurozone emerged as one of the best performing major economies last year. Forward-looking indicators in the survey suggest that momentum will continue for at least another few months – welcome news for the European Central Bank as it moves to unwind policy.
IHS Markit’s Final Composite Purchasing Managers’ Index, seen as a good overall growth indicator for the eurozone, rose to 58.8 in January from December’s 58.1 and up from the flash estimate of 58.6. It is now at its highest since June 2006 and well above the 50 mark that separates growth from contraction.
“The optimism reflects the strong economic upturn that the eurozone is experiencing, which continues to be broad-based and is set to continue in the months ahead,” said Bert Colijn at ING. “Backlogs of work are increasing, job creation is historically very strong and new orders continue to pour in. This makes for a rosy growth outlook.”
Earlier figures from Germany, Europe’s biggest economy, showed private sector growth was at a near seven-year high while in France the business boom showed no sign of abating in January.
However, investor morale in the bloc deteriorated this month over discontent with coalition negotiations between German Chancellor Angela Merkel’s conservatives and the centre-left Social Democrats (SPD).
Still, Italian business growth was at a 10-and-a-half-year high while in Spain the service industry, worth around half of total economic output, expanded at its fastest pace in six months.
Those upbeat surveys stand in stark contrast to a British PMI, which was at the bottom end of a range of forecasts in a Reuters poll and showed the UK economy slowed sharply in January.
“Following falls in the manufacturing and construction PMI surveys released last week, the weak January services sector survey will do little to assuage fears that the economy lost the momentum it gained in Q4 at the start of 2018,” said Paul Hollingsworth at Capital Economics.