Eurozone economy ‘sizzles’ as European Central Bank readies monetary bazooka

Growth in the French services sector has slowed in the wake of the Nov 13 attacks in Paris, although a faster increase in manufacturing activity has helped keep the private sector expanding, a survey showed on Monday.

The survey was conducted from November 12 to November 20, with about 60 percent of responses received after the attacks, which killed 129 people and injured another 352.

“We think the key reason for the slowing in services growth is due to the attacks”, Chris Williamson, Markit’s chief economist said. That drove the manufacturing PMI up to a 19-month high of 52.8 from 52.3.

The eurozone economy started to “sizzle” in November, as leading surveys showed that the currency bloc is growing at its fastest rate since early 2011.

In Germany, a sharp upturn in services activity boosted private sector growth.

Markit’s flash composite Purchasing Managers’ Index climbed to 54.4 from 53.9 last month, as a recovery continued to be led by the service sector.

A reading above 50.0 on the index indicates industry expansion, below indicates contraction.

Jessica Hinds, European Economist at Capital Economics, agreed, saying that even if the eurozone economy does grow by 0.5 percent in the fourth quarter, this “will not be sufficient to eat into the vast amount of spare capacity that still exists”.

“November’s slightly improved PMI reading will no doubt do little to dissuade policymakers that more needs to be done at their December meeting to ensure stronger and more sustainable growth”, he said.

Yet overall, European businesses reported the fastest rates of growth in business activity and employment for four and a half years in November, according to Markit. A few service providers reported that the terrorist attacks in Paris had negatively impacted on activity.

The flash France composite output index also declined to a three-month low in November, slipping from 52.6 in October to 51.3, falling short of analysts’ expectations for a 52.5 reading, while the services activity index slid from 52.7 to 51.3 in November.

Markit said almost half the feedback was collected before last week’s Paris attacks and an earlier French composite PMI slumped to a three-month low of 51.3 from October’s 52.6.