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Europe Manufacturing Grows at Fastest Pace in Four Months, Led by Germany

Europe’s manufacturing industries expanded at the fastest pace in four months in November, led by Germany, the region’s largest economy.

A gauge of manufacturing in the 16-nation euro area rose to 55.3 from 54.6 in the previous month, London-based Markit Economics said today. It had previously reported an increase to 55.5 in November. A reading above 50 indicates expansion.

Germany has powered the region’s recovery as global demand boosted sales at companies from Daimler AG to BASF SE. The European Commission said on Nov. 29 that while German growth will outpace the euro region’s expansion this year, the economies of Ireland, Spain and Greece may continue to shrink.

“Euro-zone economic activity lost momentum in the third quarter and it seems likely to be relatively muted over the coming months,” said Howard Archer, chief European economist at IHS Global Insight in London. “Tightening fiscal policy across the region, high unemployment, recurring sovereign-risk problems and slower global activity are serious threats.”

New orders at manufacturers rose at the fastest pace since July and payrolls increased for a seventh month, Markit said.

‘Less Rosy’

In Germany, the manufacturing gauge rose to 58.1, a three- month high, from 56.6 the previous month, below an initial estimate of 58.9. France’s indicator increased to a 10-year high of 57.9 from 55.2, while the Italian gauge fell to 52 from 53.

Europe’s so-called peripheral nations continued to struggle. Ireland’s index was 51.2, while Spanish manufacturing stagnated and Greece’s contracted.

Beyond Germany and France, “conditions are far less rosy in other parts of the euro zone,” said Markit Chief Economist Chris Williamson.

A Chinese manufacturing gauge rose more than economists forecast in November, according to a report from the logistics federation today. A PMI released by HSBC Holdings Plc also jumped. In the U.S., the Institute for Supply Management’s factory index probably declined to 56.5 from 56.9, according to the median of 82 economists surveyed by Bloomberg.

Euro-region growth may weaken to 1.5 percent next year from 1.7 percent in 2010 as governments cut spending to reduce budget deficits, the Brussels-based commission said this week. On Nov. 28, Ireland became the second euro nation to receive external aid as officials sought to prevent a debt crisis from spreading.

Some companies have trimmed costs to revive earnings. ThyssenKrupp AG, Germany’s largest steelmaker, said yesterday that it returned to profit in the fiscal year through September after selling divisions and reducing its workforce. Euro-region unemployment rose to 10.1 percent in October, the highest in more than 12 years.

Markit said on Nov. 4 that a euro-area services gauge rose to 55.2 in November from 53.3 in the previous month, while a composite index increased to 55.4 from 53.8 in October. Markit will release final figures for both indicators on Dec. 3.

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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