If the latest data, out yesterday, is any guide at all, then the euro area is set for something special.
The best ever – yesterday, the latest Flash Purchasing Managers Index tracking the euro area was released, and it was a stonker.
IHS Markit releases its purchasing managers indexes, or PMIs, every month, and as rule they seem to be the best guide we have for an up to date snapshot of the economy. So eagerly anticipated are the PMIs, that some time ago, Markit elected to start producing flash PMIs for certain regions – namely the euro area, US and Japan. It is a bit like holding Christmas a week early to appease impatient kids.
And the latest Flash PMI for the euro area for December jumped to 58. To put that reading in context any score over 50 is meant to be consistent with growth. That reading was the best score in 80 months.
A sub index tracking manufacturing rose to the highest reading ever – so that is ever, we didn’t even get PMIs that high when the dinosaurs were around.
Chris Williamson, Chief Business Economist at Markit said: "The PMI is signalling an impressive 0.8 per cent GDP increase in the fourth quarter, with accelerating growth seen in both Germany and France, where fourth quarter growth rates of 1.0 per cent and 0.7-0.8 per cent are indicated respectively."
He added “France has been the big surprise this year, rapidly pulling out of its malaise to help shift the eurozone expansion into a higher gear."
As for the US, the index fell to a nine-month low, with manufacturing rising nicely but services struggling.
In UK, alas we don’t get flash PMIs on the UK, we will have to wait for the new year to get readings for December. In November, the UK manufacturing PMI rose strongly, ahead of the US, Spain and Ireland, but behind Germany, Netherlands, Austria, Italy and France. The index tracking services was much weaker, however.
Andrew Kenningham, Chief Global Economist at Capital Economics said that the indices indicated that "advanced economies in aggregate ended 2017 growing at a heady pace of around 4 per cent annualised. They also suggest that the euro-zone will begin the New Year as the most dynamic of the major advanced economies.”
The euro recovery is export led, since the euro crisis earlier this decade the region has slowly been refashioned in the image of Germany – it seems Germanic economics is now a euro area wide thing, which may be a problem for the rest of the world because if the euro area is in surplus to the rest of the world, the rest of the world must be in deficit to the euro area.