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Euro-Area Manufacturers Start Year with Near-Record Momentum

Feb. 1, 2018
Solid global trade, a recovering labor market and monetary stimulus from the European Central Bank are all supporting the currency bloc’s economy.

Manufacturing in the euro area grew at one of the fastest paces on record in January, with high demand fueling inflationary pressures.

A Purchasing Managers’ Index for the sector slipped to 59.6 -- matching a previous flash estimate -- from 60.6 in December, IHS Markit said on Thursday. Companies raised selling prices by the most in almost seven years, partially due to a steep increase in energy costs, the London-based company said.

Solid global trade, a recovering labor market and monetary stimulus from the European Central Bank are all supporting the currency bloc’s economy, which expanded last year by the most in a decade. While inflation so far has remained muted, policy makers have expressed confidence that price growth will accelerate.

“The euro zone’s manufacturing boom continued in full swing,” said Chris Williamson, chief business economist at IHS Markit. “With higher costs being increasingly passed on to customers, the survey sends a warning signal for a potential rise in future consumer price.”

The euro was little changed after the report, before rising to $1.2448 at 11:15 a.m. Frankfurt time.

Output improved the most in the Netherlands, but also picked up speed in Italy and Greece. While gauges for other euro-area countries slipped, they still signaled strong performances.

The upturn comes amid a wider pickup in global manufacturing. Asian data published this week continue to point to steady growth momentum, with gauges increasing in Japan and South Korea and a measure for Chinese factory activity remaining unchanged.

In the euro area, order growth continued to exceed capacity, leading to a near-record increase in uncompleted orders and underpinning business confidence, which jumped to an all-time high, according to the report.

By Carolynn Look

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