April 5, 2017 / 8:16 AM / in 10 months

Euro zone business activity at six-year high in broad recovery

LONDON (Reuters) - Euro zone businesses enjoyed their best quarter in six years at the start of 2017 and although growth was not quite as fast as a flash estimate, the upturn was broad-based, a survey suggested on Wednesday.

Soaring demand allowed firms to raise prices at the fastest rate since mid-2011 and survey compiler HIS Markit said the data pointed to first-quarter economic growth of 0.6 percent, faster than the 0.5 percent predicted in a Reuters poll last month.

The final Markit Composite Purchasing Managers’ Index, regarded as a good guide to growth, rose to a near-six year high of 56.4 in March from February’s 56.0. The flash reading, at 56.7, had suggested a sharper rise.

“This is quite a positive start to the year and pointing to accelerated growth in the region as a whole,” said Oliver Kolodseike at CEBR.

Earlier surveys from Germany and France, the bloc’s two biggest economies, showed growth accelerated last month and while the rates of expansion slowed in Italy and Spain they remained robust.

Output prices rose at their fastest rate in nearly six years. The sub-index jumped to 53.1 from 52.2, lower than the flash 53.3 reading but still probably welcomed by the European Central Bank, which has been trying to stimulate inflation for years.

A worker controls a tapping of a blast furnace at Europe's largest steel factory of Germany's industrial conglomerate ThyssenKrupp AG in Duisburg, Germany December 6, 2012. REUTERS/Ina Fassbender/File Photo

Inflation in the 19-member currency union plunged to 1.5 percent in March, official data showed on Friday, apparently vindicating ECB President Mario Draghi’s cautious policy stance and proving the bloc may be years away from a sustained rise in consumer prices. The ECB would like inflation just below 2 percent.

ECB chief economist Peter Praet said on Monday the Bank’s monetary policy stance remained appropriate.

“We don’t expect the ECB to act yet, they will keep their policy stance as a ‘wait-and-see’ approach. The PMI numbers are just one indicator -- you have to wait for more official data,” Kolodseike said.

A PMI covering the bloc’s dominant services industry came in below a flash estimate of 56.5, registering 56.0. Still, that was above the 55.5 February final number and was the highest since May 2011.

On Monday, a sister survey showed manufacturers in the bloc struggled to keep up with demand last month, despite increasing activity at the fastest rate in nearly six years.

To meet growing demand -- which accelerated at the fastest rate in almost six years in March -- services firms ramped up hiring. The employment index was 54.4, up from 53.6 and marking the fastest rate since the end of 2007.

“Most welcome for a region still suffering near-double digit unemployment is a rise in the survey’s employment index,” said Chris Williamson, chief business economist at HIS Markit.

Editing by Catherine Evans

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