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Eurozone business activity growth fastest in nearly 7 years in December

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Eurozone business activity growth fastest in nearly 7 years in December

Economic growth in the euro area picked up further momentum at the end of 2017, with December seeing the fastest growth of business activity for nearly seven years, flash purchasing managers' indices from IHS Markit showed.

The flash eurozone PMI composite output index for December stood at 58.0, up from 57.5 in November and its highest since February 2011. The best factory output and order book gains since 2000 powered the provisional manufacturing PMI to a record high of 60.6.

Business activity in the service sector also had its largest monthly improvement since April 2011. The December flash services PMI activity index climbed to 55.8 from 54.3 in the previous month.

A PMI score of more than 50 indicates expansion.

The upturn in activity came as inflows of new orders showed the biggest monthly increase for just over a decade. In manufacturing, the largest gain in new orders since April 2000 got a boost from export orders, which increased at a rate only marginally below November's record high.

Companies raised capacity in line with robust demand and the improved outlook. Measured across both the manufacturing and service sectors, employment growth was the joint-highest since September 2000, matching November's recent high. However, capacity constraints caused a further significant rise in backlogs of uncompleted orders.

Strong demand also motivated firms to raise their prices. Average charges for goods and services showed a slightly smaller rise than the previous two months but still registered one of the largest upturns since mid-2011.

"The eurozone economy is picking up further momentum as the year comes to a close, ending its best quarter since the start of 2011. The PMI is signalling an impressive 0.8% GDP increase in the fourth quarter, with accelerating growth seen in both Germany and France, where fourth quarter growth rates of 1.0% and 0.7-0.8% are indicated respectively," IHS Markit Chief Business Economist Chris Williamson said.

In Germany, the flash composite Output Index climbed to an 80-month high of 58.7 in December, after registering 57.3 in November. German companies finished the year by recording the sharpest growth in business activity in more than 6.5 years.

France's December flash composite index dipped to a two-month low of 60.0 from 60.3 in November. The flash services activity index also dropped to a two-month low of 59.4 from 60.4 in the previous month. Despite the declines, business activity growth in France remains among the sharpest recorded since data were first available in May 1998.