The pace of economic growth in the eurozone accelerated to the fastest so far this year in November. Rising order books meanwhile prompted firms to take on extra staff at the joint fastest rate since early-2008, and prices charged inched higher, indicating that inflationary pressures are at their highest for over five years.
The preliminary ‘flash’ Markit Eurozone PMI, based on approximately 85% of final survey replies, rose to 54.1, up from 53.3 in October. The latest reading signalled the strongest monthly increase in output since last December. Identical rates of expansion were seen across both the manufacturing and service sectors, with the latter seeing the best expansion for 11 months. Although manufacturing output growth eased slightly, the rise was still the second-largest in 2016 so far.
New order inflows also showed the largest monthly improvement since last December, with the rate of growth accelerating for the third month running. The influx of new work helped cause backlogs of uncompleted orders to rise at the fastest rate since May 2011.
With firms’ outstanding order book volumes accumulating to the greatest extent in five-and-a-half years, companies took on more staff to help raise operating capacity. Employment growth strengthened for the second month running to reach the joint-highest pace since February 2008.
Average prices charged by companies for their goods and services meanwhile rose for the first time since August of last year, led by price rises in the manufacturing sector. Furthermore, although only marginal, the price increase was all the more notable for being the largest since August 2011.
Increased prices commonly reflected the need to pass higher costs on to customers to protect margins. Average input costs showed the largest monthly rise for one-and-a-half years. In manufacturing, the rise in input costs was the sharpest for over four-and-a-half years.
Germany saw another strong performance, with the rate of business activity growth dipping slightly but remaining well above the recent low seen in September. German service providers reported the fastest expansion since May, but growth slowed in manufacturing, albeit remaining robust thanks largely to improved export sales.
Growth meanwhile picked up in France to show the second-best expansion over the past year, with both new orders and employment showing the largest gains for almost one-and-a-half years. Services led the expansion, though manufacturing also continued to improve on the back of rising exports.
Elsewhere in the eurozone, growth of business activity accelerated markedly to a ten-month high, with new orders and employment likewise recording stronger rates of increase.
Chris Williamson, Chief Business Economist at IHS Markit:
The PMI readings so far for the fourth quarter point to GDP expanding 0.4%, led by a rebound in German growth to 0.5%. France is also seen to be enjoying its best spell since the start of the year, with the PMIs signalling GDP growth of 0.2-0.3% in the fourth quarter. (…)