Eurozone Data Point to Strengthening Recovery
23 November 2017 - 9:29PM
Dow Jones News
By Paul Hannon and William Horobin
The eurozone economy appears to have gained fresh momentum as
2017 draws to a close, led by a revival in France.
The fresh acceleration bodes well for next year, and suggests
the $10 trillion economy may again partner the U.S. in supporting a
stronger global expansion.
Data firm IHS Markit on Thursday said its composite Purchasing
Managers Index for the eurozone--based on survey responses from
5,000 manufacturers and service providers--rose to 57.5 in November
from 56.0 in October, reaching its highest level in more than 6 1/2
years. A reading above 50.0 signals an expansion in activity.
That was a stronger outcome than most economists had expected,
with those surveyed by The Wall Street Journal last week expecting
to see an unchanged reading.
Chris Williamson, IHS Markit's chief business economist, said
the measure suggests the eurozone economy will grow at a
quarter-to-quarter rate of 0.8% in the final three months of the
year, which would mark a pickup from 0.6% in the three months
through September.
"The message from the latest eurozone PMI is clear: Business is
booming, " he said.
France was the main source of surprise, recording its highest
reading since the middle of 2011. That surge was led by its
services sector, the PMI for which jumped to 60.2 from 57.3,
confounding economists' expectations of a drop to 57.0.
France's economy has been growing over half a percentage point a
quarter for a year, fueled by a strong recovery in business
investment and steady consumer spending growth. In 2017, the
country's national statistics bureau expects the economy to expand
1.8%, breaking with several years of meager growth.
The stronger growth is a shot in the arm for President Emmanuel
Macron, helping the 39-year-old leader reduce France's budget
deficit and smoothing the implementation of contentious changes to
labor laws.
Still, employment remains a weak spot in France's economic
recovery. The latest figures showed unemployment rose to 9.7% in
the third quarter--the first quarter-on-quarter increase for two
years--and monthly counts of job seekers have shown volatility
since Mr. Macron took office in May.
However, there was encouraging news for Mr. Macron in the survey
of purchasing managers, which showed new jobs being created at the
fastest pace in 16 years. That rapid pace of hiring was shared
across the eurozone.
A stronger French economy would add support to Germany's
leadership of a stronger recovery. Germany's statistics agency
Thursday confirmed that its economy grew at a quarter-to-quarter
rate of 0.8% in the three months through September, making it the
strongest of the Group of Seven largest developed countries in that
period.
The surveys come a day after the European Commission's measure
of consumer confidence hit its highest level since January
2001.
The strength of those indicators suggest economists may be wrong
to expect a modest slowdown in growth in 2018. They include
economists working for the European Central Bank, who expect
economic growth to ease to 1.8% from 2.2% this year.
Were the economy to prove stronger than they had expected,
policy makers at the central bank would be less likely to approve
another extension of their bond-buying program beyond its
tentatively scheduled end in September 2018. The surveys of
purchasing managers also recorded a pickup in inflationary
pressures, with prices charged by businesses rising at the fastest
pace since mid-2011.
Write to Paul Hannon at paul.hannon@wsj.com and William Horobin
at William.Horobin@wsj.com
(END) Dow Jones Newswires
November 23, 2017 05:14 ET (10:14 GMT)
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