Europe News

Euro zone business activity surprises in October


Manufacturing and services output in the euro zone rose above all expectations in October, according to figures from Markit.

The composite purchasing manager's index (PMI) came in at 54.0, up from 53.6 in September and above expectations for a reading of 53.4 from analysts polled by Reuters. The 50-point mark separates growth from contraction.

Earlier this morning, French composite PMI was released showing the index had risen to 52.3, up from September's final figure of 51.9 and beating analysts' downbeat forecasts for a decline to 50.2.

The good news kept coming from Germany, the euro zone's largest economy, whose PMI came in at 54.5 in October, up from 54.1 in the previous month and brushing off concerns over the Volkswagen scandal or slowdown in China.

The results could add fuel to the fire for the European Central Bank (ECB) to increase its stimulus program in the 19-country euro zone in order to boost growth and the rate of inflation, which is currently negative.

On Thursday, the President of the ECB Mario Draghi said the bank's 1 trillion euro ($1.1 trillion) bond-buying program policy would need to be "re-examined" in December.

He added that the governing council would be ready to use all its available instruments within its mandate. This suggests that the quantitative easing program could be extended beyond September 2016.

Chris Williamson, chief economist at Markit, said the PMI "brings welcome news" that the euro zone economy picked up in September but he sounded a note of caution too.

"With new business growing at the fastest rate for six months, firms were encouraged to boost staffing levels again. However, the PMI remains at a level signaling a modest 0.4 percent quarterly rise in GDP, suggesting the region will struggle to attain more than 1.5 percent overall growth in 2015. The rate of job creation, although on the rise, remains insufficient to make serious headway into reducing unemployment."

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