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Eurozone Business Growth Remains Strong On Manufacturing Boost

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Eurozone private sector retained its solid growth momentum in August, led by manufacturing that expanded at the fastest pace in over six years on the back of strong demand for exports.

The flash Composite Output Index of the Purchasing Managers' survey climbed to a two-month high of 55.8 from July's 55.7, study results from IHS Markit showed Wednesday. Economists had forecast a lower reading of 55.4 for the month.

A score above 50 suggests expansion in activity. The flash estimate is based on approximately 85 percent of final replies.

The rate of private sector expansion remained around the best seen over the past six years.

The flash Purchasing Managers' Index for the manufacturing sector rose to a two-month high of 57.4 in August from 56.6 in July. In contrast, economists had expected the measure to drop to 56.3.

The output index for manufacturing also rose to a two-month high of 58.1 from 56.5.

The highlight this month was manufacturing exports, which grew at the fastest pace in six-and-a-half years, leading to a sharp gain in new orders.

The Services PMI, however, skidded to a seven-month low in August, dropping to 54.9 from 55.4 in July. The easing, which was in contrast to expectations for an unchanged reading, came despite further gains in new orders.

"The latest PMI readings for the Eurozone signal a continuation of the recent strong performance of the currency bloc's economy," IHS Markit Associate Director Andrew Harker said.

"Overall, this is another positive set of numbers for the euro area, which continues to enjoy its best growth spell for a number of years," he added.

Outstanding business levels in the euro area private sector hit the lowest level thus far this year in August, mirroring the trend in the service sector. Meanwhile, manufacturing backlogs increased at the strongest pace in over 11 years.

Job creation remained solid in August, but the pace slowed in both manufacturing and service sectors.

Inflationary pressures rose in August, ending an easing trend seen over the past few months.

Cost inflation picked up for the first time since February and output prices rose at the fastest pace in three months, albeit at a modest rate.

Business confidence eased from a record high seen in May and was the lowest since last November, yet strong overall.

Private sector output across the euro area rose at a broadly similar pace to July, the survey found.

Both Germany and France continued with strong output growth in August, with the former posting a faster expansion than in July, while the momentum was unchanged in the latter.

The German Composite PMI rose to a two-month high of 55.7 from 54.7 in the previous month. The factory measure climbed to 59.4 from 58.1 and the services equivalent increased to 53.4 from 53.1. Both were the highest in two months.

The French private sector growth stagnated in August with the overall PMI holding steady at 55.6. The services index fell to a seven-month low of 55.5 from 56. However, the factory sector expanded at the fastest pace since April 2011 with the measure rising to 55.8 from 54.9.

The rest of the euro area logged weaker, yet marked, gains in output during the month. The stronger growth of manufacturing output was offset by a slower rise in services activity, IHS Markit said.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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