Euro area flash PMIs rise strong in November, economy likely to grow robustly

The euro area economy is expected to keep growing strongly. The flash Purchasing Managers’ Index for the service sector rose sharply for the month of November. The index rose to 56.2 from 55 in the previous month, while the manufacturing PMI index rose to 60 from 58.5. The data released today will make it easy for the European Central Bank to justify its forced reduction of the bond buying program in 2018, noted Commerzbank in a research report.

A strong upswing has established itself in the euro area, stated Commerzbank. The PMI for the service sector has made up for its moderate fall since May. The manufacturing PMI for November is at the highest level since April 2000. Such high PMIs in the past went in correlation with a rise in real GDP of over 0.75 percent on the previous quarter.

The data released today once again showed that the central bank’s hugely expansionary monetary policy is having more and more of a visible effect on the real economy. Also, the external economic environment remains favorable.

Even if the recent strengthening of the euro is being a drag on price competitiveness of firms producing in the euro area, this negative impact might be countered by generally rising global demand, added Commerzbank. The solid growth permits it to argue that the inevitable reduction of its asset purchases next year is fundamentally justified. Robust growth might push inflation up sooner or later.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 2.04858, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -63.3362. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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