Eurozone businesses had their most active month this calendar year in November, and raised their prices for the first time in more than a year, according to a survey of purchasing managers released Wednesday.
The pickup in activity suggests the eurozone's modest economic recovery has gained some momentum as 2016 draws to a close, and is another indication that rising levels of political uncertainty are having little impact on the behavior of businesses or households.
IHS Markit said its composite Purchasing Managers Index for the eurozone's manufacturers and service providers, which is based on a survey of 5,000 companies, rose to 54.1from 53.3 in October, its highest level since December of last year and above the 53.4 consensus forecast of economists polled by The Wall Street Journal last week. A reading above 50.0 signals an increase in activity, while a reading below signals a decline.
The survey suggests that higher levels of activity will be sustained over coming months, with new orders also rising at the fastest pace this year.
"Increasing numbers of firms are boosting capacity as a result of the order book backlog, leading to the joint-largest increase in employment seen this side of the global financial crisis," said Chris Williamson, IHS Markit's chief business economist.
According to the survey, businesses raised their prices for the first time since August 2015, an encouraging development for the European Central Bank as it struggles to boost inflation to its target of just under 2% from 0.5% in October.
A separate survey released Tuesday by the European Commission found that consumers became more optimistic about their prospects in November, shrugging off the uncertainties created by the election of Donald Trump as the next U.S. president and the prospect of political turbulence across their own continent.
Mr. Trump's election has raised questions about whether the U.S. will continue to extend the unconditional security guarantee that has underpinned European prosperity since World War II. It also highlighted the possibility that antiestablishment views could receive increased support in a series of coming votes across the eurozone.
France, Germany and the Netherlands will hold elections in 2017, with French President Franç ois Hollande and German Chancellor Angela Merkel under pressure from freshly energized populist parties, as well as more traditional rivals.
More immediately, Italian Prime Minister Matteo Renzi has pledged to resign if voters reject key constitutional changes that aim to slim down the country's legislature and speed up lawmaking in a Dec. 4 referendum.
Some economists continue to expect activity will weaken in the early months of next year as political worries bite, and most expect members of the ECB's governing council to announce a continuation of their bond buying program beyond its scheduled end in March when they next meet on Dec. 8.
"We suspect that growth will slow next year as political uncertainty and a temporary rise in inflation weigh on domestic demand," said Jennifer McKeown, chief European economist at Capital Economics. "Mindful of these risks, we expect the ECB to announce a six-month extension of its Asset Purchase Programme at the current pace in December and think that tapering is a long way off."
The eurozone economy grew at an annualized rate of 1.4% in the three months through September. Economists said the composite PMIs for October and November point to an acceleration in growth to between 1.6% and 2% in the final quarter.
Write to Paul Hannon at firstname.lastname@example.org
(END) Dow Jones Newswires
November 23, 2016 06:05 ET (11:05 GMT)
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