Sunday 25 August 2019

Business growth at four-year high, but Eurozone firms cutting prices

Armed police at La Defense, the main business district of Paris. Photo: Reuters
Armed police at La Defense, the main business district of Paris. Photo: Reuters

Jonathan Cable

Business activity in the Eurozone reached its fastest level in more than four years, but firms are continuing to cut prices.

This could embolden the European Central Bank to take further stimulus measures in a bid to do more to boost inflation.

But separate data showed that growth in the services sector in France slowed in the wake of the Paris attacks.

Private sector activity has risen for the 10th straight month, with the flash composite Purchasing Managers Index for November at 51.3 for the manufacturing and services sectors combined, down from 52.6 in October, survey compiler Markit said. "We think the key reason for the slowing in services growth is due to the attacks," Markit's Chris Williamson said.

Some 60pc of survey responses from companies in the services sector and 52pc in manufacturing were received after the attacks, Markit said.

"Clearly there's been a cut in footfall and any sort of feel-good factor amongst consumers in the wake of the horrific events," Mr Williamson said. "But history does tell us that these events tend to have a very short-lived impact," he said.

Overall, there was good news for business activity across the 19-member bloc, with an upbeat survey showing activity rose to its fastest pace since mid 2011.

Even with the ECB injecting €60bn a month of new money through its bond-buying programme since March to support growth and inflation, prices rose only 0.1pc last month. It is expected to expand the programme next month.

With firms cutting prices for a second month, Markit's Composite Flash Purchasing Managers' Index, based on surveys of thousands of companies, jumped to a more than four-year high of 54.4 from October's 53.9.

"Overall, Eurozone GDP growth of even 0.5pc 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. (Reuters)

Irish Independent

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