Output eurozone rose at fastest pace since December 2007

10-23-2009 20:20

German business sentiment climbed slightly in October, while the eurozone output rose at the fastest pace since the end of 2007 this month. The initial eurozone composite output index climbed to 53.0 this month, while September showed a reading of 51.1. Output in the private sector rose for the third straight month, which was the largest increase since late 2007. FactSet, headquartered in Norwalk, Connecticut (US), reported that economists forecasted a reading of 51.6.

Output eurozone rose

The Purchasing Managers’ Index (PMI) climbed to an 18-month high of 50.7 this month in comparison to 49.3 in September, while forecasts showed an increase to 50.
The index of business activity in the service sector rose to a 20-month high of 52.3, while the reading in September was 50.9.
Markit chief economist, Chris Williamson, commented that the figures demonstrate that the eurozone economy has began the last quarter of 2009 “strongly, as the pace of growth in the service and manufacturing sector increased.”
Williamson stated that the figures run parallel to the GDP that gained approximately 0.4% on a quarterly basis in October.
“The pace of staff reductions weakens and expectations regarding confidence in the service sector and manufacturing order-to-inventory indicators point to a recovery in the labor market in the beginning of 2010,” Williamson added.

Failed to exceed expectations

The Munich-based Institute for Economic Research (Ifo) released this Friday its German business climate index for industry and trade, which climbed to 91.9 in October in contrast to the previous month that showed a reading of 91.3. That beat the median estimate of 92.
Joerg Kraemer, Commerzbank's chief economist, commented that October’s Ifo index failed to exceed expectations, which was also the case in September.

Export opportunities improve

“The period of data, regarding the business climate en general, exceeding expectations seems to have ended,” Kraemer stated. Nevertheless, the eurozone manufacturing Purchasing Managers’ Index, which is a better indicator for the current business situation, is likely to exceed expectations in the next months.”
The expectations index by the Institute for Economic Research climbed to 96.8 this month, in contrast to September’s reading of 95.7.
The institute stated: “The manufacturing business climate is improving in comparison to September. Companies believe that export opportunities improve, despite the stronger European Common Currency.”
Firms are planning to reduce the pace of job losses “to some extent,” the Ifo Institute declared.

Retailers less optimistic

Still, retailers are less confident about the six-month business forecast than in the previous month and are less satisfied with the current business conditions, the survey demonstrated.
The Institute for Economic Research stated that in the construction sector the business climate did not change considerably.