Euro area December services PMI rises to highest since April 2011, growth to have accelerated in Q4

Euro area’s final PMIs for December indicated towards increased growth momentum at the end of 2017. Earlier in this week, the headline manufacturing PMI rose to a series high of 60.6, while the services PMI rose by 0.4 points to 56.6, the highest since April 2011. This led to an upward revision in the composite PMI of the same magnitude to 58.1, a level not seen since early 2011.

Thus, overall, the PMIs strongly implied that the euro area economy accelerated at the end of 2017, noted Daiwa Capital Markets Research in a report. Over a quarter as a whole, the PMIs were in line with growth of 0.8 percent quarter-on-quarter in the fourth quarter.

“We suspect that they might be overestimating somewhat the strength - strictly speaking, the higher PMIs for output mean that economic growth is more broad-based but not necessarily significantly stronger - and so forecast growth of 0.7 percentQ/Q, still an impressive rate, which would match the Q2 reading and be 0.1ppt stronger than Q3”, stated Daiwa Capital Markets Research.

The PMIs from the large member states widely painted a positive picture. For instance, tallying with the extremely upbeat Ifo indices, German manufacturers evidently continue advance from improved economic external conditions, with the relevant PMI affirmed at 63.3, a series high. Given that Germany’s services PMI remained unrevised at 55.8, domestically-focused economic activity in the nation also seems strong. The PMIs suggest that German economy grew 0.9 percent sequentially in the fourth quarter.

Meanwhile, the French PMIs also delivered a positive message, in spite of some downward revisions to leave the composite index falling short of November’s level, the figures for the fourth quarter as whole implied that momentum in the French economy took a step up from the third quarter, when GDP grew 0.5 percent sequentially.

In the meantime, Italy’s composite PMI rose in December to leave its fourth quarter average suggestive of stable growth close to the 0.4 percent sequential rate of third quarter heading into the current pre-election period.

At 21:00 GMT the FxWirePro's Hourly Strength Index of Euro was slightly bullish at 57.0218, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -56.6542. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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