 "Euro zone manufacturing PMI 53.7 vs 53.3 forecast")
Euro zone business expanded at the fastest rate this year in November, thanks to strong activity at manufacturers and a spike in new orders, even as firms generally held prices steady, a survey showed on Wednesday.
The strong run of data offers some hope that the economy may be at the start of a more solid cyclical upturn and will be welcome news for the European Central Bank, which is still likely to announce next month an extension to its massive stimulus programme.
IHS Markit's euro zone flash composite Purchasing Managers' Index, seen as a good overall growth indicator, jumped to 54.1 from October's 53.3, the highest reading this year and just shy of last December's 54.3. It was far above the 50 point line indicating growth in activity.
Only one of the 29 economists surveyed by Reuters had a higher forecast than the November print.
"It's a good, solid set of results," said Rob Dobson, senior economist at IHS Markit, adding the PMI pointed to 0.4 percent growth in the current quarter.
"We're seeing broad-based growth in the euro zone, not just in the large economies, with strong upticks in manufacturing supported by accelerating output and new orders."
More From This Section
A separate Reuters poll last week predicted fourth-quarter growth will be slightly lower at 0.3 percent, while inflation will average 0.2 percent this year and 1.3 percent in 2017, much lower than the ECB's 2 percent target ceiling.
In the composite PMI survey, a sub-index measuring new business shot up to 53.8 from 52.9, its highest since December
2015.
The bloc's dominant services industry also performed much better than expected, smashing even the highest forecast in a Reuters poll. Similar to the composite number, its PMI came in at a 11-month high of 54.1, up sharply from October's 52.8.
That came despite unchanged output prices, only the second time in the past 14 months when companies did not resort to discounting to drum up new business.
Euro zone inflation has risen in baby steps in recent months, hitting 0.5% in October, and if the trend of strengthening price pressures continues, it could dampen expectations of further policy easing from the ECB.
The surge was in part due to a spike in incoming orders that stretched firms' capacity to its highest since mid-2011, suggesting activity could remain elevated as businesses run through the volume of work.
Manufacturers had a strong run as well this month due to robust demand. The factory PMI climbed to 53.7, its highest since January 2014, above the poll median and October's 53.5.
The output sub-index, which feeds into the composite PMI, nudged down to 54.1 from 54.6.
Following Britain's vote to leave the European Union in June, there were concerns that euro zone businesses would take a hit — something Dobson at IHS Markit says is yet to happen.
"Until Article 50 is triggered, we don't know what kind of trade relations will be there between the UK and Europe and until that happens, companies will probably continue with business as usual," he added.