Euro zone businesses sprinting to year-end after busy November

Euro zone businesses sprinting to year-end after busy November
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By Jonathan Cable

LONDON (Reuters) - Business activity across the euro zone looks set to end 2017 on a high note after a busy November, according to a survey giving the latest evidence the bloc's economy was a star performer this year.

Growth accelerated last month as firms struggled to meet booming demand -- in stark contrast to Britain, where the dominant services sector lost some momentum as firms worry about what leaving the European Union will mean for them. GB/PMIS

"It confirms that the euro zone economy remains in rude health and the final quarter of the year is going to be very strong. We see a lot of momentum," said Angel Talavera at Oxford Economics.

Forward-looking indicators in the survey suggest the momentum will be maintained this month.

IHS Markit's final composite Purchasing Managers' Index for the euro zone, seen as a good guide to growth, was confirmed at an earlier flash reading of 57.5, up from October's 56.0.

The PMI scaled its highest level since April 2011 and was comfortably above the 50 mark that separates growth from contraction.

In less upbeat data, euro zone retail sales fell more than expected in October, official data showed on Tuesday.

"Warm weather weighed on clothing sales and therefore overall retail sales in October, but November's rise in consumer confidence to a 16-year high suggests that sales growth rebounded last month," said Stephen Brown at Capital Economics.

Growth in Germany's services sector slowed a little last month, PMIs showed, but remained solid, while booming growth in France led firms to step up hiring to the fastest pace in 16 years.

Italy's services sector growth accelerated after slowing for three months, boosting prospects for continued expansion in the euro zone's third-largest economy, although Spain's grew at a slightly slower pace than a month earlier.

"There is a synchronised upturn in the euro zone -- it is not just a German story or core versus periphery," Talavera said.

But Britain's IHS Markit/CIPS services PMI, spanning businesses from hotels to hairdressers, slumped to 53.8 in November from October's 55.6.

"Political uncertainty and the consumer slowdown will continue to keep a lid on growth next year, even if there are some positive Brexit steps over coming weeks," said James Smith at ING.

Hopes for a deal on the so-called Brexit divorce deal with the European Union was thwarted by Northern Ireland's Democratic Unionist Party (DUP) over border concerns on Monday.


A euro zone indicator measuring new orders climbed to 57.3 last month from 56.6, a level not seen in almost seven years. As firms struggled to fulfil that demand -- despite increasing headcount sharply -- backlogs of work were built up at rates not seen in over a decade.

IHS Markit said the data were consistent with fourth quarter economic growth of 0.8 percent for the euro zone, faster than many of its peers and more optimistic than the 0.6 percent predicted by a Reuters poll last week.

A PMI covering the bloc's dominant service industry soared to a six-month high of 56.2 from October's 55.0.

That upturn coincided with firms raising prices at one of the steepest rates this year. The output price index held steady at October's 52.1.

Signs of stronger pricing pressures, alongside robust growth, will be welcomed by the European Central Bank which has struggled for years to get inflation anywhere close to its near 2 percent target ceiling.

(Editing by Catherine Evans)

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