Eurozone PMI growth at two-year high

Eurozone PMI growth at two-year high
By Ralph Atkins in Frankfurt
Copyright The Financial Times Limited 2009
Published: November 23 2009 11:43 | Last updated: November 23 2009 11:43
http://www.ft.com/cms/s/0/f5ba0d18-d821-11de-8b04-00144feabdc0.html


The eurozone recovery is accelerating in the final months of the year but could wane early next year, according to a closely-watched survey.

Purchasing managers’ indices for the 16-country region showed private sector activity expanding this month at the fastest rate in two years, with France and Germany powering the revival.

However, forward-looking parts of the survey pointed to a loss of momentum in coming months.

The results add to evidence that the eurozone economy has returned firmly to an expansion path, but risks seeing growth fizzle out once government and central bank emergency support measures are withdrawn.

The eurozone composite index, covering services and manufacturing, reached 53.7 in November, up from 53.0 in October. With a figure above 50 indicating an expansion in activity, that marked the fourth consecutive monthly expansion.

The eurozone recession, the worst in continental Europe since the 1930s, ended in the third quarter, when gross domestic product increased by 0.4 per cent.

November’s purchasing managers’ indices suggested fourth-quarter growth could be stronger, said Chris Williamson, chief economist at Markit, which produces the survey, although he warned that “we also saw the first signs of growth peaking”.

Details of the survey showed new orders growing at a slower rate than last month, especially in the service sector. Backlogs of work, meanwhile, continued to decline, pointing to an increase in spare capacity, while rates of job shedding remained high by historic standards.

German service sector companies appeared to be performing significantly less well than counterparts in France, perhaps reflecting weaknesses in German consumer sentiment.

One bright spot, however, was an acceleration in growth in new export orders reported by eurozone manufacturers. This suggests that the strong euro is having less impact than feared. Companies cited increased trade within the eurozone and improving global market conditions, Markit said.

Country surveys for France and Germany continued to show France outpacing its larger neighbour. That contrasted with the picture shown by the most recent GDP data, which showed the German economy expanding by 0.7 per cent in the third quarter, while France managed only 0.3 per cent.

The difference could be explained by government spending, which is not covered by the purchasing managers’ survey. The GDP data could also be revised.