The 19-country eurozone economy closed out 2017 growing stronger than at any time in nearly seven years and optimism about the year ahead remaining buoyant, according to a closely watched survey Thursday.
Financial information company IHS Markit said that its purchasing managers index — a broad gauge of business activity — spiked to 58.1 points in December from the previous month's 57.5. Any reading above 50 indicates growth and December's level was the highest since February 2011, pointing to impressive quarterly economic growth of 0.8%.
The eurozone economy gained momentum over 2017 as a series of headwinds that had previously capped growth and optimism eased. Most notably, populist leaders hoping to ride the anti-establishment sentiment that led to Brexit and Donald Trump's presidential victory in the U.S. failed to win elections in France and the Netherlands.
"A stellar end to 2017 for the eurozone rounded off the best year for over a decade, continuing to confound widely-held fears that rising political uncertainty would curb economic growth," said Chris Williamson, the firm's chief business economist.
What's particularly encouraging for the eurozone, which has spent much of the past decade in crisis mode, is that the growth is broad-based across countries and not just isolated to powerhouse Germany. With previous laggards such as Ireland and Italy showing momentum, there's renewed belief that the currency bloc has got past its debt crisis and is in a growth cycle that will cut into unemployment. Hiring is running at a 17-year high rate, according to IHS Markit.
"New work is flowing to companies at a rate not seen for a decade and backlogs of uncompleted work are rising sharply," Williamson said.
While the economic backdrop has transformed over the past few months, it has not boosted wages much. One big question for the year ahead is whether rising prices largely linked to higher oil prices work through to the wider economy and, alongside falling unemployment, push wages higher. That should help consumer price inflation edge up toward the European Central Bank's goal of just below 2%.