Euro-Area Companies Expand Workforce as Order Growth Picks Up

The euro-area economy maintained its strong momentum at the start of the final quarter of this year, with rising workloads encouraging companies to take on new staff at the sharpest pace in more than a decade.

A Purchasing Managers’ Index for manufacturing and services slipped to 55.9 in October from 56.7 in September, IHS Markit said on Tuesday. Economists surveyed by Bloomberg predicted the measure would drop to 56.5.

While the reading weakened to a two-month low, job creation in manufacturing rose to the highest level since data collection started in 1997, reflecting strong order inflows that were buoyed by export demand. Service-sector employment also strengthened.

The euro-area recovery is gathering pace just as the region’s central bankers convene this week to decide on how to gradually pull back monetary support. While the European Central Bank currently stimulates the economy by buying some 60 billion euros ($70 billion) worth of bonds a month, it is considering reducing that amount by at least half next year as it approaches the final phase of quantitative easing.

“The euro-zone economy has had a good year so far, and the initial signs are that this has continued at the start of the final quarter of 2017,” said Andrew Harker, associate director at IHS Markit. Scaling back bond purchases is “a move that would appear to be justified based on this latest set of PMI data.”

While inflation isn’t yet near the ECB’s goal — it stood at only 1.5 percent in September — IHS Markit said that increasing pressure on capacity is having an effect on prices. Selling prices rose at the sharpest rate since June 2011, before the region’s longest recession.

A gauge for manufacturing rose to 58.6 from 58.1 in September, the highest level in over six years, IHS Markit said. The services PMI dropped to 54.9 from 55.8.
Source: Bloomberg