Growth spurt for Euro manufacturing sector

Markit’s Eurozone Manufacturing Purchasing Managers Index (PMI) rose to 52.7 in December from November’s 51.6, confirming an early estimate and marking its best reading in 31 months.

Readings above 50 indicate growth in activity.

New orders piled in at the fastest pace since April 2011, and a near two-year stretch of job cuts across eurozone factories almost came to an end last month.

Looking at individual countries in the region, the mood was largely positive, with the exception of France. Manufacturing activity in the eurozone’s second biggest economy hit a six-month nadir last month.

“With producers reporting further growth of new orders, exports and backlogs of work, the stage is set for a good start to 2014,” said Chris Williamson, of Markit, which compiles the PMIs.

“It seems likely that the manufacturing sector will help drive a meaningful, albeit still modest, recovery in the wider economy.”

Mr Williamson also noted that prices in manufacturing companies are starting to rise slightly, suggesting firms are seeing some improvement in pricing power.

The weakness of eurozone inflation, at just 0.9 per cent in November, has caused concern among policymakers at the European Central Bank. The latest PMIs suggest that disinflationary forces from manufacturing, at least, may have peaked.

Markit said the December PMIs were consistent with production growing at a quarterly rate of one per cent. The region’s recovery may be hobbled by a sickly French manufacturing base.

“While Germany, Italy and Spain are seeing the strongest output growth since early 2011, buoyed to varying degrees by improved export sales, France is seeing a steepening downturn, in part the result of widening export losses,” said Mr Williamson.