Germany drives eurozone activity as recovery gathers pace

Europe's economy showed further signs of heightened recovery today (September 23rd) as a new survey reveals demand and confidence improved in September.

London-based Markit Economics said its composite purchasing managers' index (PMI) for the bloc rose to a 27-month high in September, signalling the largest rise in activity since June 2011. The flash PMI rose for the sixth consecutive month, up from 51.5 in August to 52.1.

Business activity has now risen for three successive months, and September rounded off the strongest quarterly expansion since the second quarter of 2011.

Service sector growth was led by Germany, where chancellor Angela Merkel won a convincing victory in Sunday's elections, a sign voters are happy with her handling of the eurozone crisis thus far.

The country saw business activity grow at the fastest rate for eight months as new business showed the largest monthly rise for over two years. Employment grew at the sharpest rate for 18 months as a result.

Business activity in France rose marginally for the first time since February 2012, reflecting a stabilisation of new order inflows, though the picture was mixed. Business activity in the service sector grew, but manufacturers reported a faster decline in output.

Across the single currency bloc, higher levels of business activity were driven by faster growth of new business. New orders increased for the second successive month in September, growing at the fastest rate since June 2011.

Overall business activity rose on average for the second successive month, growing at the steepest rate since April 2011. Manufacturing continued to grow, accompanied by the first significant increase in service sector activity since May 2011. Employment meanwhile fell at the slowest rate for over two years.

Chris Williamson, chief economist at Markit, said: "An upturn in the Eurozone PMI in September rounds off the best quarter for over two years, and adds to growing signs that the region is recovering from the longest recession in its history."

He added that rising inflows of new business "bode well" for the fourth quarter, though European Central Bank policymakers are unlikely to change monetary policy anytime soon.

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