Eurozone business growth accelerates in November

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Eurozone business growth accelerates in November

The Euro zone business growth unexpectedly accelerated this month as consumers shrugged off another wave of coronaviruses and new restrictions, while price pressures soared again, a survey showed on Tuesday.

The Flash Composite Purchasing Managers' Index, a good indicator of overall economic health, increased to 55.8 in November from 54.2 in October.

The survey exceeded all forecasts in a Reuters poll which had predicted a drop to 53.2, and was comfortably above the 50 mark that separates growth from contraction.

Chris Williamson, chief business economist at IHS Markit said that a stronger expansion of business activity in November defied economists' expectations of a slowdown, but it is unlikely that the euro zone will not suffer slower growth in the fourth quarter, because rising virus cases are set to cause more disruption to the economy in December.

Supply bottlenecks caused by the Pandemic have made it a sellers' market for raw materials and the composite input prices index has gone up to 75.9 from 73.2, the highest since the survey began in mid- 1998.

A PMI for the bloc's dominant services industry rose to 56.6 from 54.6, well above all forecasts in a Reuters poll that had predicted a fall to 53.5.

There was a waned optimism as the renewed lockdowns are likely to have a bigger impact on services. The business expectations index fell to 66.6 from 69.0, its lowest reading since February.

Manufacturing activity remained robust and the PMI of the factory rose to 58.6 from 58.3. An index that feeds into the composite PMI increased to 53.8 from 53.3.

Demand was strong and factories were able to pass on some of the record increase in raw material costs to customers. The output prices index jumped to 74.3 from 72.6, the highest since the IHS Markit began collecting the data 19 years ago.

That casts doubt on the European Central Bank's claim that inflation is transitory. According to a Reuters poll earlier this month, the Euro zone inflation expectations are at risk of overshooting the Bank's 2% target next year.

With supply delays near to record highs and energy prices spiking higher, upward pressure on prices has risen far above anything previously seen by the surveys, Williamson said.