Euro-Area Growth Heads for Strong Finale in Year of Uncertainty

(Bloomberg) -- Euro-area economic momentum accelerated to its fastest pace in over six years in November, setting the scene for a buoyant end to a year that saw political wobbling across much of the region.

A Purchasing Managers’ Index for manufacturing and services rose to 57.5 in November, IHS Markit said on Tuesday. That’s up from 56.0 in October and matches a Nov. 23 flash estimate. Output was bolstered by booming manufacturing, which only saw one stronger expansion in the 20-year survey history.

Euro-Area Growth Heads for Strong Finale in Year of Uncertainty

“Business as a whole in the euro zone has so far been largely unaffected by political uncertainty in many countries, notably Germany and Spain, once again defying widespread expectations that growth would slow,” said Chris Williamson, chief business economist at the London-based company. “Given the strength of order-book growth and hiring, as well as the elevated level of business optimism, the euro zone should start the new year on a solid footing.”

Neither German Chancellor Angela Merkel’s struggle to form a governing coalition nor Catalonia’s vote to separate from Spain have left significant marks on the 19-nation euro economy so far, which is heading for its best annual performance in a decade. Supported by monetary stimulus from the European Central Bank, the bloc is enjoying its most synchronized expansion since before the single currency was founded.

Even so, price pressures are still far below the ECB’s goal, and policy makers have already committed to adding stimulus for most of next year.

“Heading into 2018, the big questions will be how long this growth spurt can be sustained, and whether price pressures will rise,” Williamson said, adding that data suggest “inflationary pressures will pick up next year.”

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