The eurozone private sector last month expanded the most since early 2011, driven by a near-record continued expansion of manufacturing and the steepest rise in the service sector.
The IHS Markit composite output index rose to 58.1 in December from 57.5 in November. This was the highest reading registered since February 2011, and the headline index has signalled growth for 54 successive months.
The services Purchasing Managers’ Index improved to 56.6 from 56.2 in November. At the same time, the services PMI improved to 55.8, in line with estimate, from 54.3 in November. The pace of output expansion improved in Germany, Italy and Spain, while France saw its rate of output growth remaining close to November’s high.
British service sector growth accelerated at a faster-than-expected pace in December. The IHS Markit/Chartered Institute of Procurement and Supply Purchasing Managers’ Index rose to 54.2 in December from 53.8 in November. Readings above 50 indicate expansion.
Among components, new orders increased at the weakest pace since August 2016 amid subdued business investment and cost consciousness among clients. In view of this, the rate of job creation across the service sector slipped to a nine-month low in December.
Regarding pricing, service providers indicated another marked increase in their average prices charged, which was overwhelmingly linked to strong cost pressures. However, service providers retained an upbeat view of overall business prospects for the next 12 months.
The US Fed is still concerned about weak inflation. The minutes of the most recent Federal Reserve meeting held last month revealed that stubbornly weak inflation could slow the pace of interest rate hikes in 2018.
At the meeting, the Fed had increased its benchmark interest rate a quarter point from 1.25 to 1.5 per cent.
The minutes indicated that the Fed’s preferred measure of inflation remained below two per cent in October and was lower than early in the year, meaning that interest rates are likely to remain low this year.
While low inflation is seen as transitory, some Fed committee members were concerned that inflation might stay below the objective for longer than they expected.
The minutes also indicated that labour market conditions continued to strengthen during November and suggested that real GDP was rising at a solid pace in the second half of 2017. The Fed also raised its economic projections due to the tax reforms passed by the Trump administration.
China services PMI climbs to 53.9 in December. The latest survey from Caixin showed that December’s China’s PMI rose to 53.9, up from 51.9 in November, and hence it moved further above the boom-or-bust line of 50 that separates expansion from contraction. This confirms that the services sector in China continued to expand in December, and at an accelerated pace. The composite index came in at 53.0, up from 51.6 in the previous month.
Individually, there was a solid increase in services activity, accompanied by faster growth in manufacturing output as employment remained broadly stable.
This report was compiled by Bank of Valletta plc for general information purposes only.