LONDON: Euro zone private businesses ended the third quarter growing much more strongly than predicted, bolstered by manufacturers, according to a survey which showed the momentum should carry on into October.
That energy, alongside rising inflationary pressures, is likely to increase expectations the European Central Bank will announce plans next month to reduce its monthly spending on quantitative easing.
IHS Markit´s euro zone Flash Composite Purchasing Managers´ Index for September, seen as a good guide to economic growth, bounced to 56.7 from August´s 55.7, comfortably above the 50 level that separates growth from contraction.
September´s reading was above all forecasts in a Reuters poll, which had predicted a dip to 55.5. The euro gained 0.4 percent to $1.1989, on track to end the week higher. Earlier PMIs from Germany and France showed activity in the bloc´s two biggest economies also exceeded the top end of expectations in Reuters polls.
"The euro zone PMI suggests that the economy remains very strong and will embolden policymakers at the ECB. Indeed, the price indices of the Composite PMI also picked up in September," said Stephen Brown at Capital Economics.
The PMI pointed to third-quarter growth of 0.7 percent, IHS Markit said, faster than the median forecast in a Reuters poll last week for 0.5 percent. The upturn came despite businesses increasing prices at one of the fastest rates this year.
The output price index rose to 52.6 from 52.1."This rounds out a run of data that provide evidence of building pipeline inflation pressures. This will help to build a case for ECB tapering next year," said Bert Colijn at ING.
The ECB will announce in October a six-month extension to its asset purchase programme but will cut how much it buys each month to 40 billion euros from January, a poll of economists found last