Euro zone business activity remains robust on services strength
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Europe’s economy has held up better than anticipated during the US trade storm and is expected to almost maintain 2025’s pace of growth in 2026.
PHOTO: AFP
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- Eurozone private sector activity remained strong in November, with the Composite PMI at 52.4, signalling continued economic growth.
- Services showed strong growth, offsetting manufacturing weakness. Despite slowing, Germany drove growth, while France exceeded expectations.
- Inflation nears the ECB's 2% target, suggesting stable interest rates. Economists predict rates will remain unchanged in December.
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Private-sector activity in the euro area stayed strong in November, feeding hopes that economic growth can pick up in the last months of the year.
The Composite Purchasing Managers’ Index (PMI) compiled by S&P Global came in at 52.4, almost matching October’s 52.5 and still comfortably above the 50 threshold separating growth from contraction. Analysts had predicted an unchanged reading.
Services recorded their best month in 1½ years, helping to offset unexpected weakness in manufacturing. Germany remained a driving force, despite slowing expansion that left its composite reading of 52.1 short of estimates. Meanwhile, France – where persistent struggles over the budget are weighing – exceeded expectations, reaching just below 50.
“The euro zone is more or less maintaining its relatively robust expansion rate,” Hamburg Commercial Bank economist Cyrus de la Rubia said in a statement on Nov 21. “Although the manufacturing sector is dampening growth performance, the high weight of the service sector in the overall economy means that the euro zone as a whole should grow faster in the final quarter than in the third.”
Europe’s economy has held up better than anticipated during the US trade storm and is expected to almost maintain 2025’s pace of growth in 2026 as a wave of new investments in infrastructure and the military start to be felt. The headline number masks disparities among the euro area’s 20 members, however, with about half of the bloc by output failing to grow in the third quarter.
For the European Central Bank, the situation does not currently warrant further reductions in interest rates, which have been halved from their 4 per cent peak. Inflation has been brought back to near the 2 per cent target and most officials see it remaining around there for the foreseeable future.
Mr de la Rubia said November’s surveys show that faster cost inflation in the closely watched services industry is being tempered by a slowdown in the pace of sales-price increases.
“On balance, the headaches for monetary policymakers, who are paying particular attention to the rate of inflation among service providers, should be limited,” he said. “We expect interest rates to remain unchanged in December.”
PMIs are closely watched by markets as they arrive early in the month and are good at revealing trends and turning points in an economy.
A measure of breadth of changes in output rather than depth, business surveys can sometimes be difficult to map directly to quarterly gross domestic product. BLOOMBERG
