Euro zone factories start 2017 with fastest growth in nearly 6 years
Euro zone factories started 2017 by ramping up activity at the fastest rate for nearly six years, as manufacturers were more optimistic than they have been since at least the middle of 2012.
The survey also highlighted mounting inflationary pressures, which will be welcomed by the European Central Bank who has struggled to get prices to rise as fast as they would like.
IHS Markit’s final manufacturing Purchasing Managers’ Index for the euro zone rose to 55.2 in January from December’s 54.9.
A reading above 50 indicates growth and an earlier preliminary estimate had indicated a more modest rise to 55.1.
An index measuring output, which feeds into Friday’s composite PMI, held steady at December’s 56.1, which was its highest since April 2014.
“Euro zone manufacturing is off to a strong start to the year,” said Chris Williamson, chief business economist at IHS Markit.
Manufacturers were increasingly upbeat. A future output sub-index jumped to 66.9 from 63.7, its highest reading since the data was first collected in July 2012.
“Optimism about the year ahead has risen to the highest since the region’s debt crisis, suggesting companies are maintaining a buoyant mood despite the heightened political uncertainty caused by Brexit and looming general elections in the Netherlands, France and Germany,” Williamson said.
“Inflationary pressures are also picking up. Much of the increase in costs and prices can be linked to the weakened exchange rate and higher global commodity prices,” he said.
“However, there are also signs of demand running ahead of supply, which hints at a tentative build-up of core inflationary pressures,” he added.
Euro zone inflation jumped to 1.8% in January, while economic growth picked up to a faster rate than in the US and unemployment fell to a seven-year low at the end of last year, official data showed yesterday.
But the rebound looks unlikely to prompt any early rethink of the ECB’s stimulus programme as rises in core prices were modest.
Having already spent over €1.5 trillion buying mostly sovereign bonds, the ECB in December unexpectedly said it would trim its monthly spend to €60 billion from April. It currently spends €80 billion a month.
Economists in a Reuters poll last month unanimously said the ECB’s next move, after April’s planned cut in monthly bond purchases, would be to taper quantitative easing further.
Source: RTE
