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European economy expands at fastest rate in seven years

Thursday, 4 January, 2018 - 17:01

The eurozone economy ended 2017 with its strongest growth in almost seven years, thanks to expansion in the services and manufacturing sectors in its largest economies, according the IHS Markit survey of purchasing managers.

The composite PMI, considered a good indicator of growth in the euro area, reached 58.1 in December in its final version, against 57.5 the previous month, slightly exceeding the mark of 58.0 announced in the first estimate on December 14th.

This is the survey’s highest reading since February 2011, and puts it well above the threshold of 50 that separates growth from contraction.

“The average PMI reading for 2017 is the highest annual trend in the survey’s two-decade history, with eurozone countries dominating the worldwide PMI growth rankings for much of 2017, said Chris Williamson, chief economist at IHS Markit.

“Record years were seen in Germany, Austria, the Netherlands and Ireland, while Italy and France had their best annual performances since 2000. Spanish manufacturing had its best year since 2006, while Greece saw the strongest performance since 2008,” Williamson said.

The composite PMI averaged 56.4 in 2017, the best annual trend since 2006. According to IHS Markit, it points to growth of 0.8 percent in the fourth quarter in the euro area, higher than 0.6 percent expected on average in a poll of economists conducted by Reuters.

The new orders sub-index reached 58.0 in December, its highest level since July 2007. The PMI services index reached a high of more than six years of 56.6, against 56.2 in November.

The UK services sector continued to grow in December and companies are more optimistic about 2018, although Brexit continues to hold back their investment plans, according to the survey of British purchasing managers.

The IHS Markit index reached 54.2 in December, its second highest score since April.  According to IHS Markit, December surveys, including those on construction and the manufacturing sector,  the UK economy probably grew by 0.4 or 0.5% in in the last quarter of 2017.