Eurozone business growth unexpectedly accelerated in October - but not enough to temper stimulus expectations

 
Jessica Morris
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Manufacturing continued to lag behind services (Source: Getty)

A new survey has shown business growth in the Eurozone unexpectedly strengthening, but not enough to temper expectations that the European Central Bank (ECB) will boost its monetary stimulus programme.

"Unless the PMI business activity and price indices pick up significantly in coming months, the combination of relatively weak growth and deflation signalled by the survey will fuel expectations that the ECB will step up its quantitative easing programme at the December meeting," Chris Williamson, chief economist at Markit, said.

Yesterday European Central Bank (ECB) boss suggested Bank would do more to boost the Eurozone economy in December, amid the risks by the emerging market slowdown and financial market turbulence to its outlook for growth and inflation in the single currency bloc.

Markit's Flash Eurozone PMI Composite Output Index climbed from a four-month low of 53.6 in September, taking it to 54 this month.

Output rose across both services and manufacturing, pointing to a broad-based upturn.

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But the detail reveals an increasing divergence between services and manufacturing firms in the Eurozone. Growth of new business hit a six-month high, with service sector gains offsetting weak new order growth in the manufacturing sector.

Manufacturing firms also slashed prices in a bid to attract customers, sending average selling prices down for the first time in three months.

"The PMI remains at a level signalling a modest 0.4 per cent quarterly rise in gross domestic product, suggesting the region will struggle to attain more than 1.5 per cent overall growth in 2015. The rate of job creation, although on the rise, remains insufficient to make serious headway into reducing unemployment," Williamson said.

"The renewed fall in output prices meanwhile suggests that inflation will remain in negative territory as we head towards the end of the year."

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