Eurozone business activity accelerated at its fastest pace in more than four years last month as Italy turned in its best performance since early 2011 and German growth strengthened, surveys showed yesterday.
However, while those upbeat surveys will provide some welcome news for the European Central Bank, which is struggling to boost the economy and inflation, they still only point to modest third-quarter GDP growth.
The European Central Bank yesterday left interest rates at record lows as had been widely anticipated.
ECB president Mario Draghi unveiled a revamp of quantitative easing, however, which will allow for more purchases of each euro member’s debt as the weaker global outlook prompted a wholesale reduction of officials’ economic forecasts through 2017.
“The purchasing managers’ index is indicating eurozone GDP growth close to 0.4% in the third quarter, a solid albeit unspectacular rate of expansion,” said Chris Williamson, chief economist at survey compiler Markit.
“Policymakers have little scope for complacency, however, as slower growth in the emerging markets and recent financial market volatility, as well as a stronger euro, have the potential to hit the economy’s performance in coming months.”
Markit’s final August Composite index beat an earlier estimate of 54.1, settling at 54.3, its highest level since May 2011.
In July it registered 53.9 and has now been above 50, which denotes expansion, since July 2013.
The index for the bloc’s dominant service industry rose to 54.4 from July’s 54.0.
The manufacturing index, released on Tuesday, dipped to 52.3 from 52.4.
An earlier composite index from Germany, Europe’s largest economy, leaped to 55.0 from 53.7 in July, smashing an estimate for a more modest rise to 54.0.
Italy’s composite reading rose to 55.0, its highest since March 2011.
Spain’s index also soared but it was a different story in France where the composite index slumped to 50.2, its lowest since the start of the year.
In another positive sign for the ECB, firms increased prices last month, although only barely, for the first time since early 2012.
The composite output price sub-index climbed to 50.1 from July’s 49.8.
The ECB began pumping €60bn a month of fresh cash into the economy about half a year ago through bond purchases with the aim to boost inflation.
But official data showed prices rose just 0.2% in the 19-country bloc last month.
To meet the upturn in demand, service firms took on staff at the second fastest rate since May 2011.
The index rose to 52.3 from 51.7 in July.
Unemployment surprisingly fell to a more than three-year low of 10.9% in July.
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