Eurozone growth hits 26-month high, says PMI survey

Stronger German exports helped eurozone activity to expand in August

Eurozone business activity grew at its fastest pace for 26 months in August, according to a closely-watched survey.

The Markit composite purchasing managers' index - which includes manufacturing and services - rose to 51.7 points, from 50.5 in July.

A number higher than 50 indicates growth.

The news boosted European stock markets, which rose in early trading, despite falls in Asia amid fears the US may scale back its stimulus programme.

Markit said the PMI for the services sector, which accounts for the bulk of economic activity, rose to 51 in August to a 24-month high, from 49.8 in July.

The manufacturing sector PMI hit a 26-month high of 51.3 points, up from 50.3 in July.

However, a breakdown of the figures showed that while Germany continued to expand thanks to stronger export activity, France contracted, falling to 47.9 in August from 49.1 in July.

"So far, the third quarter is shaping up to be the best since the spring of 2011," said Chris Williamson, Markit's chief economist.

"The upturn is being led by Germany," he said. "A big question mark still hangs over France's ability to return to sustained growth."

And he cautioned that rising unemployment indicated there were continuing problems. "The job shedding in part reflects the need to keep costs down and remain competitive, but there is still some uncertainty about the outlook," Mr Williamson said.

Worries

Stock markets reacted positively to the news, which followed recent data showing that the eurozone bloc had emerged from recession.

The main markets in London, Frankfurt and Paris were up about 1%, shrugging off concerns about the US stimulus programme that had unnerved Asian investors.

On Wednesday, the minutes of the July meeting of the US central bank, the Federal Reserve, showed that officials were "broadly comfortable" with plans to scale back the $85bn (£54bn) a month bond-buying programme.

While the minutes did not reveal any clues about when the measure may be tapered, analysts said that they did reinforce the view that the tapering will happen.

"Most analysts still expect tapering to start in September, or at the bare minimum a September announcement and implementation through October and November,'" said Stan Shamu, a market strategist at IG Markets in Melbourne.