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 While the upturn in activity may be welcomed by European Central
Bank policymakers, Monday's surveys showed firms again cut prices,
suggesting ultra-loose monetary policy is doing little to get
inflation near their 2 percent target.
"This upbeat survey about the European economy fell short on one
important aspect though: inflation," said Bert Colijn at ING. "The
survey indicated that despite the strongest output growth and job
creation since early 2011, there was still no sign of inflationary
pressures."
Even with the ECB injecting 60 billion euros a month of new money
through its bond-buying program since March to support growth and
inflation, prices rose only 0.1 percent last month. It is expected
to expand the program in December.
With firms cutting prices for a second month, Markit's Composite
Flash Purchasing Managers' Index <EUPMCF=ECI>, based on surveys of
thousands of companies and seen as a good guide to growth, jumped to
a more than four-year high of 54.4 from October's 53.9.
That beat the 53.9 median forecast in a Reuters poll. The index has
been above the 50 mark that separates growth from contraction since
July 2013.
The data pointed to fourth quarter economic growth of 0.4-0.5
percent, Markit said. A Reuters poll published earlier this month
suggested growth would be 0.4 percent
"Overall, euro zone GDP growth of even 0.5 percent will not be
sufficient to eat into the vast amount of spare capacity that still
exists and help to boost inflation," said Jessica Hinds at Capital
Economics.
"We therefore doubt that today's data will be sufficient to dissuade
the ECB from increasing its monetary support in December."
The ECB is ready to act quickly to boost anemic inflation in the
euro zone, its president said on Friday, offering the strongest hint
yet that the bank will unveil fresh stimulus measures at its Dec. 3
meeting.
Growth in the French services sector slowed although a faster
increase in manufacturing activity helped keep the private sector
expanding.
Some 60 percent of survey responses from companies in the services
sector and just over half in the manufacturing industry were
received after the attacks that killed 130 people in cafes, a
concert hall and a soccer stadium last Friday, Markit said.
"We think the key reason for the slowing in services growth is due
to the attacks," Markit's chief economist Chris Williamson said.
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"Clearly there's been a cut in footfall and any sort of feel-good
factor amongst consumers in the wake of the horrific events. But
history does tell us that these events tend to have a very
short-lived impact."
France's slowdown came as growth in Germany's private sector
accelerated, suggesting Europe's biggest economy is defying worries
over a slowdown in China and the emissions scandal at car maker
Volkswagen.
Both the German services and manufacturing PMIs were higher than
even the most optimistic forecasts in a Reuters poll.
Some of the pick-up across the region can be attributed to a weaker
euro, which makes goods and services cheaper for foreign buyers. The
common currency has fallen around 12 percent this year.
New export orders for manufactured goods came in at their fastest
rates in six months, with the sub-index registering 52.8 compared
with October's 52.7. That drove the manufacturing PMI up to a
19-month high of 52.8 from 52.3.
An index measuring output, which feeds into the composite PMI, rose
to 53.9 from 53.6.
The bloc's dominant service industry expanded at its fastest rate
since May 2011. Its PMI reading climbed to 54.6 from 54.1,
encouraging firms to increase headcount.
The service sector hired staff at the fastest rate in five years,
with the related index climbing to 52.8 from 52.3.
The euro was given a small boost after the PMIs, which also helped
Europe's main bourses claw back some of their early losses.
(Editing by Catherine Evans)
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