Reuters/London

Eurozone business activity accelerated at its fastest pace in more than four years last month, according to surveys that highlighted an ongoing divergence between laggard France and the other big economies in the currency bloc.
A generally upbeat set of surveys will provide some welcome news for the European Central Bank, although they still only point to modest third-quarter GDP growth considering near-zero interest rates and the ECB’s massive stimulus programme.
The data, which come as official numbers showed retail sales rose less than expected in July, point to growth of about 0.4% in July-September, survey compiler Markit said. That rate is likely to be sustained in coming quarters, according to a Reuters poll on the long-term outlook a few weeks ago.
“The upwards momentum that the eurozone economy had has started to fizzle out, growth no longer seems to be accelerating,” said Nick Kounis, head of macro and markets research at ABN AMRO. “There is a significant and rising risk that the ECB takes further action, maybe as early as today’s meeting.”
Although most economists expected no policy change at the ECB’s meeting later yesterday, many see a growing chance its €1tn asset purchase programme will be eventually be extended beyond a planned completion date of September 2016.
Markit’s final August Composite Purchasing Managers’ Index (PMI) beat an earlier estimate of 54.1, settling at 54.3 - its highest level since May 2011. In July it registered 53.9 and has now been above 50, which denotes expansion, since July 2013.
Italian firms had their best performance since early 2011 and German growth strengthened. Spain’s PMI also soared but it was a different story in France, the bloc’s second biggest economy, where the composite PMI slumped to its lowest since the start of the year.
Retail sales rose 0.4% across the 19 nations using the euro in July, Eurostat said earlier, less than the 0.6% pick-up predicted in a Reuters poll.
Markets have see-sawed in recent days but were relatively calm yesterday ahead of the ECB meeting and US jobs data due today which could be a major factor in determining whether the Federal Reserve raises interest rates later this month.
Britain’s services sector recorded its weakest growth in more than two years last month, mirroring signs of economic weakness in the US and China and just as the Bank of England is considering when to start to raise interest rates.
Inflation in Britain, which doesn’t use the euro, is barely above zero and yesterday’s survey suggested it was unlikely to increase fast, with the second-smallest rise in input costs for British services companies since 2009. The Markit/CIPS PMI for Britain’s services industry—which does not cover retailers or the public sector—dropped in August to its lowest since May 2013.
The PMI for the eurozone’s dominant service industry rose to 54.4 from July’s 54.0. The flash estimate was 54.3. The manufacturing PMI, released on Tuesday, dipped to 52.3 from 52.4. In another positive sign for the ECB, firms increased prices last month — although only barely — for the first time since early 2012. The composite output price sub index climbed to 50.1 from July’s 49.8.