Eurozone Private Sector Expansion Accelerates Unexpectedly

Eurozone private sector growth improved unexpectedly in November after slipping to a six-month low in October, flash survey data from IHS Markit showed on Tuesday.

The composite output index rose to 55.8 in November from 54.2 in October. The reading was expected to fall to 53.2.

The stronger expansion in the private sector is unlikely to prevent the Eurozone from suffering slower growth in the fourth quarter, especially as rising virus cases look set to cause renewed disruptions to the economy in December, Chris Williamson, chief business economist at IHS Markit said.

By sector, services outperformed manufacturing for a third straight month, recording the strongest growth of activity for three months in November.

The services Purchasing Managers’ Index improved to 56.6 from 54.6 in the prior month. The expected score was 53.5.

At the same time, the manufacturing PMI rose slightly to 58.6 from 58.3 a month ago. The reading was forecast to fall to 57.3.

Both sectors saw growth improve on the back of slightly stronger inflows of new business in November.

The upturn was accompanied by a further marked increase in inflationary pressures as firms’ costs and average selling prices charged for goods and services both rose at record rates.

The rate of job creation rose to the second-highest in over 21 years as firms sought to meet rising demand.

However, optimism about the outlook sank to a ten-month low on renewed COVID-19 worries and lingering supply constraints.

By country, growth accelerated in Germany and France, with the latter recording the stronger expansion for the second month in a row.

Meanwhile, the rest of the region as a whole enjoyed faster growth of both manufacturing and services than seen in France and Germany.

Germany’s private sector grew at a faster pace in November, although the upturn was only moderate amid subdued manufacturing growth.

The composite output index climbed to 52.8 from 52.0 in the previous month. The reading was forecast to fall to 51.0.

Output was again weighed on by supply delays in November, with manufacturers in particular recording a lacklustre rise in factory production.

The manufacturing PMI dropped to 57.6 from 57.8 a month ago. Nonetheless, the score stayed above the expected level of 56.9.

On the other hand, the services PMI improved to 53.4 from 52.4 in October. The score was also above economists’ forecast of 51.5.

Elsewhere, France’s private sector growth accelerated to a four-month high in November driven by strong expansion in services, while manufacturing production registered back-to-back declines.

The composite output index advanced unexpectedly to 56.3 in November from 54.7 in October. The score was forecast to drop to 53.6.

The services PMI rose to a 46-month high of 58.2 from 56.6 in the previous month. The expected reading was 56.0.

The manufacturing PMI posted 54.6 in November, up from 53.6 in October. Economists had forecast the index to fall to 53.0.

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