Euro zone business activity expands despite attacks

Manufacturing and services output in the euro zone rose above expectations in November, according to flash figures from Markit, despite the series of terror attacks in Paris earlier this month.

The composite purchasing manager's index (PMI) came in at 54.4, up from 53.9 in October and above expectations for a reading of 53.9 from analysts polled by Reuters. The 50-point mark separates expansion from contraction and the index this month indicated the fastest rate of expansion of output since May 2011.

Markit's Chief Economist, Chris Williamson, said the latest figures show "a welcome acceleration of euro zone growth, putting the region on course for one of its best quarterly performances over the past four-and-a-half years."

He said the data was all that more impressive given terrorist attacks on November 13 in Paris in which 129 people died which, he said, also "subdued economic activity in France – especially in the service sector."

Earlier preliminary data from Markit showed a continuation of a positive trend in the euro zone's largest economy Germany where the composite PMI rose to 54.9 in November, up from October's final reading of 54.2. The 50-point mark separates expansion from contraction.

By contrast, France's flash composite PMI disappointed by coming in at 51.3, down from 52.6 in October, with services activity weakening. However, the manufacturing survey rose to 50.8, the highest point since April 2014.

Markit Senior Economist Jack Kennedy said a key reason for the slowdown in services growth was due to the November 13 attacks in Paris by the terrorist group that calls itself Islamic State.

The data comes amid a stark warning from a leading think tank over Europe's economic future. The Institute for Public Policy Research (IPPR), a U.K.-based left-leaning think tank, said in a report Monday that the economic downturn experienced by Europe and its after-effects, such as high unemployment and labor market weakness, could become a permanent fixture in the region.

"Europe continues to face the significant challenges of tackling unemployment, underemployment and inactivity," the IPPR said in its latest report on Monday.

"The southern European economies in particular are still combating the effects of the sovereign debt crisis – high levels of joblessness and insecure or temporary work."

Across the rest of the continent, the IPPR said that workers could be left behind due to advances in automation and global competition which "act as more long-term headwinds blowing skill supply and demand out of alignment."

Such headwinds, the IPPR added, "threaten to consolidate some of the medium-term effects of recession into more permanent features of the economy – a prospect that would be deeply alarming."

An employee fits the nose cone to a Trent 700 aircraft engine on the production line at the Rolls-Royce Holdings Plc factory in Derby, U.K.,
Chris Ratcliffe | Bloomberg | Getty Images

The 19-country euro zone bloc was plunged into a deep crisis and regional recession following the 2008 financial crisis. The most acute effect of the crisis was the widespread loss of jobs as a result of industry and business cutbacks and closures.

The crisis hit southern euro zone countries more than their more prosperous northern counterparts with a number of countries, Greece, Portugal, Spain, Cyprus and Ireland, requiring bailouts of various magnitudes.

Despite a slow economic recovery in most of the euro zone over recent years, unemployment remains a problem and is stubbornly high in several countries.

While Germany has the lowest rate of unemployment, at 4.5 percent in September, according to Eurostat, joblessness in Greece and Spain remains high, at 25 percent

in Greece (in July) and 21.6 percent in Spain. For young people aged 16-25, the statistics are even worse.

The IPPR said that policymakers needed to respond "by minimizing the long-term erosion of skills as a result of recession, and investing to reshape and re-skill the labor force for the jobs of the future."

Young people, it emphasized, needed to be supported in their transitions from education to work with better careers advice, more integrated work experience opportunities and greater employer involvement in the education system.

The EU is not complacent about the need to boost jobs but it is easier said than done in a region with diverse economies, labor forces and output. In 2014, the EU launched a 315 billion euro investment offensive designed to boost jobs and growth in the region but it will take time for that project to be implemented and take effect.

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow us on Twitter: @CNBCWorld