Europe sees strong showing in services

The newly opened Louis Vuitton flagship store off Place Vendome in Paris. Economic activity in France rose at the sharpest rate in more than six years, and Euro-area output last month was led by Germany.
The newly opened Louis Vuitton flagship store off Place Vendome in Paris. Economic activity in France rose at the sharpest rate in more than six years, and Euro-area output last month was led by Germany.PHOTO: AGENCE FRANCE-PRESSE

FRANKFURT • The euro-area economy picked up last month as services performed better than estimated and new orders rose at the fastest pace in more than six years.

A purchasing managers index (PMI) by IHS Markit, measuring composite activity in the private sector, climbed to 56.7 last month. That is the strongest in four months and matched an initial reading on Sept 22. A gauge of services increased to 55.8, beating the flash number of 55.6.

The report comes weeks before the European Central Bank's Governing Council meets to decide if it can afford to pare back stimulus next year as the 19-nation economy improves. While the chief concern of policymakers is muted inflation, the PMI readings suggest that the outlook is starting to change.

"A rise in price pressures reflects the development of a sellers' market for many goods and services as demand outstrips supply," said chief business economist at IHS Markit Chris Williamson. "Deflationary forces have abated, fuelling confidence that reflationary pressures are becoming more ingrained."

Markit also said that the region looks increasingly able to withstand any political shocks.

That may be a comfort as German Chancellor Angela Merkel works out how to deal with a rise in support for far-right opposition, and Spain faces street protests in a stand-off over Catalonia's illegal vote for independence.

Euro-area output last month was led by Germany, which also saw unemployment slide to a record low, and Ireland.

Economic activity in France rose at the sharpest rate in more than six years, and Spain saw its expansion improve from August's seven-month low. Italian growth was the weakest since March.

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A version of this article appeared in the print edition of The Straits Times on October 05, 2017, with the headline 'Europe sees strong showing in services'. Print Edition | Subscribe