Euro zone business activity remained strong in August - PMI

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Euro zone business activity remained strong in August - PMI

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By Jonathan Cable LONDON, Sept 5 (Reuters) – Euro zone business activity remained robust in August and price pressures increased, according to a survey that suggested momentum would continue this month, likely bringing welcome news to policymakers. IHS Markit’s final composite Purchasing Managers’ Index for the euro zone held steady at 55.7 in August, slightly below an earlier flash estimate of 55.8. It has been above the 50-mark that separates growth from contraction since mid-2013. “The summer months have seen euro zone economic growth moderate only slightly from the rapid pace seen in the spring. The solid PMI readings for July and August set the scene for another strong GDP number for the third quarter,” said Chris Williamson, chief business economist at IHS Markit. Williamson said the PMI pointed to third quarter GDP expansion of 0.6 percent, matching second quarter growth and faster than the 0.4 percent predicted in a Reuters poll last month. Forward-looking indicators imply there will be little slowdown this month with new orders, backlogs of work, employment and an expectation gauge remaining strong. “There’s good reason to be optimistic,” Williamson said. The upbeat data came despite firms increasing prices at a faster rate – the output price index rose to 52.1 from 51.7. August inflation nudged closer to the European Central Bank’s target, registering 1.5 percent, official data showed last week. ECB policymakers will reveal their latest decision on Thursday and while no change is expected then, they will likely announce a reduction of monthly asset purchases in October, according to a majority of economists in a Reuters poll. A PMI covering the bloc’s dominant service industry fell to a seven-month low of 54.7 in August from July’s 55.4 but was still one of the best growth rates in over six years. Similarly, while the new business index fell to 54.5 from 55.2 it remained above its long-run trend.

(Editing by Toby Chopra)
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