January 4, 2017 / 9:06 AM / 7 months ago

Euro zone business growth fastest in more than five years in December - PMI

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People walk past the windows of an H&M store in Barcelona, Spain, December 30, 2016.Regis Duvignau/Files

Reuters - Businesses across the euro zone ended 2016 by ramping up activity at the fastest pace for five-and-a-half years, a survey showed on Wednesday, as a weaker currency boosted demand for their goods and services in December.

The expansion, which came alongside companies raising prices at the steepest rate since mid-2011, will be welcomed by policymakers at the European Central Bank, who for years have struggled to lift growth and inflation.

IHS Markit's final composite Purchasing Managers' Index for the euro zone rose to 54.4 in December from November's 53.9. That beat a 53.9 flash estimate and took the index to its

highest since May 2011.

The index has been above the 50 mark that divides growth from contraction since mid-2013 and was in November.

"Manufacturers and, to a lesser extent, service sector companies are benefiting from the weaker euro, which is both boosting goods exports and encouraging demand for services exports such as tourism," said Chris Williamson, chief business economist at IHS Markit.

Williamson said the data point to fourth-quarter economic growth of 0.4 percent, in line with the prediction in a Reuters poll last month.

A sub-index measuring output prices leapt to 51.7 from 50.6, its highest since July 2011. An official preliminary estimate due at 1000 GMT is expected to show inflation rose to 1 percent in the bloc last month, still a long way from the ECB's 2 percent target ceiling.

The PMI for the dominant services industry dipped to 53.7 from November's 53.8, but was well above the flash 53.1. Manufacturers enjoyed their best month in more than five years in December, a sister survey showed on Monday.

Suggesting companies will start this year on a solid footing, a December sub-index measuring new business in the service industry matched November's 10-month high of 53.5.

"Euro zone service providers linked higher levels of business activity to a combination of solid inflows of new orders and rising backlogs of work," IHS Markit said.

Reporting by Jonathan Cable, editing by Larry King

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