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Eurozone growth highest in almost 12 years in January, PMI data shows

The eurozone's economic growth reached its highest level in almost 12 years in January, bolstered by inflows of new business along with the strongest job creation since late 2000, final purchasing managers' data from IHS Markit showed.

The composite output index stood at 58.8 in January, higher than the preliminary estimate of 58.6 and the December 2017 reading of 58.1. The January reading marks the 55th consecutive month of expansion.

The manufacturing industry continued to expand in January, outpacing service sector growth, which accelerated to its best since August 2017. The sustained upturn in euro area activity led to greater price pressures, reflecting improved pricing power as demand outpaced supply, as well as rising energy prices. It also tested capacity among manufacturers and service providers, resulting in further accumulation of backlogs of work in both sectors. Employment increased at a pace matching November's 17-year high, IHS Markit said.

The services business activity index rose to 58.0, higher than the flash estimate of 57.6 and the December reading of 56.6. New business increased at the fastest rate in over a decade, exerting pressure on capacity and encouraging companies to hire more staff.

"At 58.8, the final eurozone PMI for January came in even higher than the earlier flash estimate, registering the strongest monthly expansion since June 2006," IHS Chief Business Economist Chris Williamson said. "If this level is maintained over February and March, the PMI is indicating that first-quarter GDP would rise by approximately 1.0% quarter on quarter," he added.

Italy's business activity index rose to 57.7 in January, up from 55.4 in December 2017 and the highest in more than 10 years. Service providers reported a similarly sized increase in incoming new work and higher demand from local and foreign clients. Wider company investment and expansion plans helped boost hiring.

Telecommunications, hotels and restaurants, and renting propelled Germany's business activity index to 57.3, up from 55.8 in December and the highest reading since March 2011. Service providers raised prices by the most in 9.5 years.

Business activity growth in France was broadly unchanged from the prior month, and remained among the highest for 6.5 years. The business activity index rose to 59.2 from 59.1 in December. French business reported the sharpest rise in new orders since May 2011, which in turn contributed to a further marked rise in employment numbers.