Investing.com - Economic activity in the euro zone rose more than expected in October to its highest level this year, as both the manufacturing and service sector advanced more than forecast, preliminary data showed on Monday.
In a report, market research group Markit said that its flash Euro Zone Composite Output Index, which measures the combined output of both the manufacturing and service sectors increased to 53.7 October, from the prior month’s reading of 52.6 and above forecasts for an increase to 52.8. That was the highest reading since December 2015.
The flash services purchasing managers’ index rose to 53.5 this month, from September’s final reading of 52.2, beating expectations for a reading of 52.4.
The preliminary euro zone manufacturing purchasing managers’ index unexpectedly rose to a seasonally adjusted 53.3 this month from a final reading of 52.6 in August.
Analysts had expected the index to remain steady at 52.6 in October.
Commenting on the report, Chris Williamson, chief economist at Markit said, ““The euro zone economy showed renewed signs of life at the start of the fourth quarter, enjoying its strongest expansion so far this year with the promise of more to come.”
“With backlogs of work accumulating at the fastest rate for over five years, business activity growth and hiring look set to accelerate further as we head towards the end of the year,” he said.
Williamson said that the data suggested that the euro zone economy was growing at a quarterly rate of 0.4% at the beginning of the fourth quarter.
“Policymakers will be encouraged by signs of both stronger economic growth and rising price pressures, and the prospect of a robust fourth quarter will fuel further speculation of a possible tapering of QE purchases by the ECB,” Williamson added.
On the index, a reading above 50.0 indicates industry expansion, below indicates contraction.
Immediately following the report, the euro continued trading near seven-month lows. EUR/USD was at 1.0886 from around 1.0890 ahead of the release of the data, while EUR/GBP was at 0.8893 from 0.8899 earlier.
Meanwhile, European stock markets were higher. The Euro Stoxx 50 gained 1.00%, Germany's DAX rose 0.96%, France’s CAC 40 advanced 0.88%, while London’s FTSE 100 traded up 0.50%.