Eurozone economic growth hits highest level since early 2011 - IHS Markit

Business activity in the eurozone accelerated more than initially estimated in December, with economic growth hitting its highest level since early 2011, according to figures released on Thursday.

IHS Markit's eurozone purchasing managers' composite output index rose to 58.1 from 57.5 in November, coming in ahead of the flash estimate of 58.0 and marking the highest reading since February 2011.

Meanwhile, the services business activity index printed at 56.6 in December, up from the flash estimate of 56.5 and November's 56.2, underpinned by the steepest increase in new work for over a decade. This is comfortably above the 50 level that separates contraction from expansion.

Output growth accelerated in Germany, where it hit a 24-month high, Italy, Spain and Ireland, but slowed slightly in France. That said, the rate of expansion in France was only slightly below November’s six-and-a-half year record high.

Chris Williamson, chief business economist at IHS Markit, said: “A stellar end to 2017 for the eurozone rounded off the best year for over a decade, continuing to confound widely-held fears that rising political uncertainty would curb economic growth. At 56.4, the average PMI reading for 2017 was the highest annual trend since 2006. Manufacturing is enjoying its best growth spell since data were first collected over two decades ago while the service sector closed off its best year since 2007.

“The survey data are consistent with the quarterly rate of GDP growth accelerating to an impressive 0.8% in Q4, with no sign of momentum being lost as we move into 2018. New work is flowing to companies at a rate not seen for a decade and backlogs of uncompleted work are rising sharply. Hiring is consequently at a 17-year high as firms look to boost capacity to meet rising workloads. Optimism about the outlook also turned higher in December."

Stephen Brown, European economist at Capital Economics, said: "On the whole, the PMIs paint a picture of robust growth across the euro-zone at the end of 2017. But the survey suggests that inflationary pressures are rising only slowly. Indeed, today’s final release confirmed that the euro-zone composite output prices index edged down in December, leaving it consistent with core inflation of less than 1.5% at the end of 2018."