Economic recovery in a divergent euro zone accelerated this month as a strong resurgence in private sector growth in Germany and France offset persistent stagnation in periphery members, surveys showed today.
Markit's Eurozone Flash Services Purchasing Managers' Index, made up of surveys of around 2,000 businesses ranging from banks to hotels, bounced to 55.2 in November from a final reading of 53.3 in October.
The index comfortably exceeded consensus expectations in a Reuters poll, which were for it to fall to 53.1. The services PMI has now been above the 50.0 mark that divides growth from contraction since August 2009.
"They surprised to the upside largely due to the strength of the core of the euro area, in particular Germany," said Ken Wattret at BNP Paribas.
"Although we inevitably focus on the euro zone as a whole, I think we are seeing a persistent divergence between the core countries and those on the periphery, and that is here to stay."
The European Union and International Monetary Fund agreed on Sunday to help bail out Ireland with loans to tackle its banking and budget crisis in a bid to protect Europe's financial stability.
It will be the second euro zone bailout in six months, after Greece accepted help in May and there are concerns that this may not be the last rescue package in the region.
Earlier data from Germany, Europe's largest economy, showed activity in both its services and manufacturing sectors smashed expectations, with the service sector expanding at its fastest pace since August 2007.
Germany said today its economic growth slowed to a still-healthy 0.7 per cent in the third quarter while Italy said consumer confidence unexpectedly rose this month. French manufacturing had its best month in 10 years, while services activity came in much better than expected. Smaller members continue to struggle.
The euro zone flash manufacturing index rose to 55.5 in November from a final reading of 54.6 in October, beating forecasts for a dip to 54.4, while the output index jumped to 55.9 this month, from 54.7 in October.
The euro zone as a whole escaped from its deepest recession in post-war history in the third quarter of last year, having pumped billions of euros into recovery measures, and relatively strong second-quarter growth of 1.0 per cent surprised markets.
But growth slowed to 0.4 per cent in the third quarter and analysts in a Reuters poll expect the economy to expand by between 0.2 and 0.4 per cent per quarter through to the end of next year.
The composite index, made up from the services and manufacturing sectors and often used to predict overall growth, leapt to 55.4 this month from 53.8 in October, confounding expectations for 53.6.
Markit said the data was consistent with fourth-quarter economic growth of about 0.5 percent.
Manufacturing firms were able to pass on rising input costs to customers while still increasing business as the output price index climbed to 54.9 this month from October's 53.8, its highest reading since September 2008.
Prices in the 16-nation region rose 1.9 per cent in October, nudging closer to the European Central Bank's 2.0 per cent target ceiling.
The composite employment index will provide some cheer to policymakers as it climbed to 53.0 from October's 51.1, its highest reading since February 2008.
Reuters