Eurozone output grows 'at fastest rate since 2007'
05 November 2009 @ 13:57
BRUSSELS — Private sector business activity in the 16-nation eurozone grew in October at its fastest rate since 2007, with France leading the way, a survey showed Wednesday.
The purchasing managers' index (PMI) for the 16 countries using the single currency, compiled by data and research group Markit, rose to 53.0 points from 51.1 points in September, confirming an earlier estimate.
In August, it had ended 14 months of decline.
"Surging growth in France helped propel the eurozone recovery in October, with the region expanding at the fastest pace since December 2007," said Markit chief economist Chris Williamson.
Germany and Italy are following with more modest rates of expansion, leaving Spain as the only country to see ongoing contraction in October "although even here the rate of decline continued to slow," he added.
The latest figures were well above the boom-bust line of 50 points -- a score below 50 indicating a contraction.
However the likelihood of further job losses remains a concern, as a period of consolidation is set to occur ahead of any real job creation.
Another concern is that companies still need to offer price cuts to win new business.
To illustrate that fact, the EU's Eurostat statistics agency reported that the industrial producer price index fell by 0.4 percent in the eurozone in September and by a whopping 7.3 percent in the European Union as a whole.
"But at the moment the eurozone recovery remains firmly on track," Williamson assured.
Underlining those factors, the services sector also expanded at its fastest rate in almost two years, since before the economic crash, rising to 52.6 -- a little higher than an earlier estimate.
This was the second successive monthly increase in activity and the strongest monthly gain since December 2007.
However sector job losses remained "severe" and the growth was "largely stimulated by price discounting," said Markit in its analysis.
The eurozone unemployment rate rose to 9.7 percent in September, a record high, with consumer prices in the 16-nation area falling for a fifth month running in October, Eurostat said last week.
The new Markit survey boosts hopes that the eurozone economy can pick up further in the fourth quarter after an apparent return to growth following five quarters of contraction.
Howard Archer, chief economist at London-based IHS Global Insight, said it was encouraging to see significant improvement in most of the countries' business activity in October.
"France saw robust expansion, Italy returned to growth and the rate of contraction eased in both Spain and Ireland. While German service sector activity moderated, it at least expanded for a third month running," he said.
However Archer cautioned that the services sector "is by no means completely out of the woods yet as it still faces significant obstacles such as ongoing financial sector problems, muted consumer expenditure and limited business spending."