Eurozone recovery accelerates with fastest output growth in over two years

Eurozone August figures are looking good in August, as Markit's composite purchasing manager's index (PMI) jumps from 50.5 to 51.7. Economists had predicted a rise to 50.9. The euro rose against the dollar on the news.

Manufacturing PMI came in at 51.1 from 50.3 (50.6 expected) and services outperformed estimates too, 51.0 returning to growth from 49.8 (any number above 50 implies expansion, 50.2 expected).

Chris Williamson, chief economist at Markit said:

The euro area‟s economic recovery gained momentum in August, with manufacturing and service sector companies reporting the strongest pace of expansion for just over two years.

So far, the third quarter is shaping up to be the best that the euro area has seen in terms of business growth since the spring of 2011. The economic picture from the surveys is therefore coming into line with policymakers‟ expectations of a modest yet still fragile return to growth.

Jonathan Loynes, chief European economist, Capital Economics:

The German composite index rose from 52.1 to 53.4, pointing to quarterly growth of perhaps 0.3% or more. By contrast, the French index fell back from 49.1 to just 47.9, suggesting that Q2’s surprise 0.5% rise in French GDP may prove to have been a blip. Overall, the survey provides hope that Q2’s rise in euro-zone GDP was not a one-off. But for now at least, growth remains a long way short of the rates required to start to address the region’s debt crisis.

Christian Schulz, senior economist, Berenberg:

For the ECB, the likelihood of an upward revision of its GDP growth forecast in September from -0.6% for 2013 and 1.1 % for 2014 is rising. Q2 was probably stronger than expected, and underlying momentum is building. The turbulences in emerging markets may be adding new downside risks, but the strong rise in China’s HSBC manufacturing PMI this morning to 50.1 from 47.7 should come as a relief. China is showing further signs that growth is stabilising.