LONDON (Reuters) – Euro zone business growth unexpectedly accelerated this month as consumers shrugged off another wave of coronavirus infections and new restrictions, while price pressures soared again, a survey showed on Tuesday.
IHS Markit’s Flash Composite Purchasing Managers’ Index, a good indicator of overall economic health, jumped to 55.8 in November from 54.2 in October.
The survey exceeded all forecasts in a Reuters poll which had predicted a drop to 53.2, and was comfortably above the 50-mark which separates growth from contraction.
“A stronger expansion of business activity in November defied economists’ expectations of a slowdown, but is unlikely to prevent the euro zone from suffering slower growth in the fourth quarter, especially as rising virus cases look set to cause renewed disruptions to the economy in December,” said Chris Williamson, chief business economist at IHS Markit.
Supply bottlenecks caused by the pandemic, alongside a shortage of heavy goods vehicle drivers, have made it a sellers’ market for raw materials and the composite input prices index surged to 75.9 from 73.2, by far the highest since the survey began in mid-1998.
Still, a PMI for the bloc’s dominant services industry rose to 56.6 from 54.6, well above all forecasts in a Reuters poll that had predicted a fall to 53.5.
But optimism waned as renewed lockdowns are likely to have a bigger impact on services. The business expectations index sunk to 66.6 from 69.0, its lowest reading since February.
Manufacturing activity remained robust and the factory PMI rose to 58.6 from 58.3. An index measuring output, which feeds into the composite PMI, increased to 53.8 from 53.3.
Demand remained strong and factories were able to pass on some of the record increase in raw material costs to customers. The output prices index jumped to 74.3 from 72.6, the highest since the IHS Markit began collecting the data 19 years ago.
That casts some doubt on the European Central Bank’s claim the rise in inflation is transitory. Euro zone inflation expectations are at risk of continuing to overshoot the Bank’s 2% target next year, according to a Reuters poll earlier this month.
“With supply delays remaining close to record highs and energy prices spiking higher, upward pressure on prices has meanwhile intensified far above anything previously witnessed by the surveys,” Williamson said.
(Reporting by Jonathan Cable; Editing by Susan Fenton)
