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Euro zone businesses end 2017 on near seven-year high, PMIs show

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Euro zone businesses end 2017 on near seven-year high, PMIs show

Euro zone businesses end 2017 on near seven-year high, PMIs show
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By Jonathan Cable

LONDON, Dec 14 – Businesses across the euro zone are ending 2017 on a near seven-year high, a survey showed on Thursday, with demand picking up along with rising prices and forward-looking indicators pointing to a busy start to 2018.

The results were better than economists polled by Reuters expected, with factories marking their best month in the survey’s two decades of history, while activity also accelerated in the services industry.

“It’s a super end to the year – ending it on a high note. It’s a solid picture of broad-based expansion,” said Chris Williamson, chief business economist at survey compiler IHS Markit.

IHS Markit’s composite flash Purchasing Managers’ Index for the euro zone climbed to 58.0 this month, its highest since February 2011 and confounding the median forecast in a Reuters poll for a fall to 57.2 from a final November reading of 57.5.

Anything above 50 indicates growth.

Williamson said the PMIs point to a fourth-quarter economic expansion of 0.8 percent, better than the 0.6 percent predicted in a Reuters poll earlier this month. If correct, that would be the strongest official quarterly growth rate since early 2015.

Earlier PMIs from Germany and France showed the bloc’s two biggest economies enjoyed robust growth and December’s upbeat numbers come the month before a scaling back of monthly asset purchases by the European Central Bank.

Growth in new business touched a level not seen in over a decade, with the new orders subindex rising to 57.9 from 57.3.

Firms increased headcount at one of the fastest rates in the survey’s near 20-year history too.

The PMI covering the bloc’s dominant service industry confounded a forecast for a slight dip to 56.0, instead rising from November’s 56.2 to 56.5, the highest since April 2011. That pushed up the business expectations gauge to a three-month high of 65.6 from 64.8.

The manufacturing PMI also beat expectations, bouncing to a record high of 60.6 from 60.1, confounding forecasts for a fall to 59.8.

An index measuring output, which feeds into the composite PMI, rose to 62.0 from 61.0 – the highest since April 2000. It has only been above that level once before.

Factories also built up supplies of raw materials at the third-fastest rate recorded, suggesting businesses expect demand to increase. The stocks of purchases index rose to 52.3 from 52.1, not seen since early 1998.

“Current demand is very strong … and companies are building up for good times ahead,” Williamson said.

(Editing by Hugh Lawson)

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