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Financial News: Eurozone Private Sector Expands Strongly In January

Eurozone Private Sector Expands Strongly In January

02/03/2017 - 07:20:00 (RTTNews)

(RTTNews) - Eurozone entered 2017 on a strong footing with output growth maintained at December's five-and-a-half year high and job creation near nine-year record, final data of the purchasing managers' survey from IHS Markit showed Friday.

Elsewhere, official data showed that retail trade declined in December on fuel sales, but the pace of decline halved from November.

The purchasing managers' survey showed that the composite output index held steady at 54.4 in January and slightly above the earlier flash estimate of 54.3. A score above 50 suggests growth and the indicator signaled expansion in each of the past 43 months.

Similarly, the services Purchasing Managers' Index remained unchanged in January, at 53.7, slightly above the flash score of 53.6.

The latest reading is comparable to GDP rising at a quarterly rate of 0.4 percent, Chris Williamson, chief business economist at IHS Markit, said.

Growth of euro area manufacturing production and service sector business activity both steadied at the solid rates achieved at the end of 2016. Manufacturing growth outpaced that in services for the eighth month in a row.

Output increased across the 'big-four' economies and Ireland during January, which registered the strongest expansion overall. Solid expansions were also seen in Germany, Spain and France.

The rate of job creation in the currency bloc was the fastest since February 2008. Moreover, growth of new business remained solid with the rate of increase accelerating to a 14-month high.

On the price front, the survey showed that inflationary pressures intensified further in January. Input costs increased at the fastest rate in over five-and-a-half years. Meanwhile, improved pricing power led to a further increase in average output charges.

Germany's private sector activity expanded strongly, but the pace of growth eased to a 4-month low in January. The composite PMI fell to 54.8 in January from 55.2 in December. The reading was above the earlier flash estimate of 54.7.

The services PMI dropped to 53.4 in January from 54.3 in December. But the score was above the flash reading of 53.2.

At the same time, the French private sector expanded at the strongest pace in over five-and-a-half years in January. The final composite output index rose to 54.1 from 53.1 in December. The flash score was 53.8.

The services PMI climbed to 54.1 in January from 52.9 in December. The latest index reading pointed to the sharpest rate of growth since June 2015 and the reading was above the flash 53.9.

Data published by Eurostat showed that retail sales fell unexpectedly by 0.3 percent month-on-month in December compared to a revised 0.6 percent drop in November.

Sales were expected to increase 0.3 percent. The decline reflects the weakness in consumer spending amid rising inflation.

Automotive fuel sales declined 1.1 percent due to higher prices. Food sales slid 0.4 percent from November, while non-food product sales remained flat in December.

On a yearly basis, retail sales growth eased to 2.3 percent from 3.8 percent in November. This was the weakest growth in three months. Sales were forecast to climb only 1.8 percent.

Disappointing sales figure for December is not completely alarming as sales are likely to expand in the quarter due to strong performance in October, ING Senior economist Bert Colijn said.

Perhaps this weakness should not be brushed aside straight away, as this could be a sign of caution among consumers in times of elevated political uncertainty, the economist added. Still, the outlook for retail in the Eurozone remains quite bright at the start of 2017, Colijn added.

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