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Eurozone economy ends 2017 on stellar note

13 January 2018

The eurozone economy ended 2017 with its strongest growth in nearly seven years, helped by a steep increase in service sector activity and a near-record expansion of manufacturing production, data on Thursday suggested.

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said: "The construction sector ended 2017 on a weak note, and it likely will continue to struggle in 2018".

Any reading over 50 shows growth, and this is the second-highest score since last April.

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In the eurozone's largest economies, manufacturing PMI in December was 55.8 in Spain, 57.4 in Italy, 58.8 in France, and an all-time high of 63.3 in Germany.

Markit's Purchasing Managers' Index (PMI) of service companies stood at 54.6 in December, up from 54.4 in November and compared with 54.8 expected in a Reuters poll. In spite of recovery in new order volumes in December, construction companies showed a subdued degree of positivity about the business outlook for the next 12 months.

In the US, the Federal Reserve raised interest rates three times last year and, according to officials' median forecast, has penciled in another three this year on the expectation that inflation will move back toward its 2 percent target. "This, in turn, drove a further rise in employment and higher input and output prices". The 50-point mark separates expansion from contraction.

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Greater production requirements also impacted purchasing activity which increased at the fastest pace since February.

China's overall economic growth may slow in 2018 after accelerating past year, though the government has signaled it will accept slightly weaker expansion as it deals with what it says are "critical battles" of financial stability, poverty and pollution. Output growth accelerated to its fastest since the start of the year on the back of a marked upswing in demand as the year came to a close.

Like the headline index, the internals of the December report were rock solid.

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Eurozone economy ends 2017 on stellar note