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Business activity grows in eurozone but low prices disappoint


Business activity grows in eurozone but low prices disappoint


Stronger business activity in France and Germany boosted figures for the eurozone in October – but there was no sign of healthy price increases.

Policymakers will be disappointed that companies cut prices again after holding them steady in September and increasing them for the first time in more than three years in August.

One survey of thousands of companies that is seen as a good guide to growth brought results even higher than the most optimistic forecast.

Markit’s euro zone Composite Flash Purchasing Managers’ Index EUPMCF=ECI came in at 54.0 this month, up from September’s 53.6. The best forecast in a Reuters poll predicted a dip to 53.4.

The index has been above the 50 mark that separates growth from contraction since July 2013 and Markit said the survey pointed to fourth quarter economic growth of 0.4 percent, in line with a Reuters poll last week.

Germany’s private sector grew for the 30th straight month – suggesting a good start to the fourth quarter despite concerns about the Volkswagen scandal and the Chinese slowdown.

Business activity among French firms also accelerated, suggesting the summer’s weak figures may have been a blip.

But some of that boost came from firms cutting prices again, with the euro zone composite output price index dipping back below break-even.

Still, the discounting helped the overall services PMI jump to 54.2 from 53.7, confounding expectations in a Reuters poll for a fall to 53.5. A sister survey covering manufacturers held steady at September’s 52.0, also beating the median forecast.

A factory output index, which feeds into the composite PMI, dipped to 53.3 from 53.4 but manufacturers appeared to benefit from a weaker euro – as the new export orders index rose to a four-month high of 52.6.

The overall news should please the European Central Bank, more than six months after its money-printing programme took effect.

However growth is still seen as too slow to generate inflation.

The ECB has hinted at more stimulus action and is to make a decision in December.

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