Europe Manufacturing Growth Gains More Than Estimated as Germany Thrives
European manufacturing growth accelerated more than estimated in April, driven by higher output in Germany and France, suggesting the region’s economy is weathering surging energy costs.
A gauge of manufacturing in the 17-nation euro area rose to 58 from 57.5 in March, London-based Markit Economics said in an e-mailed report today. That’s above an initial estimate of 57.7 on April 19. A reading above 50 indicates growth.
European manufacturers, led by German companies such as Volkswagen AG, are boosting production and hiring more workers to meet increased export orders. With euro-area capacity utilization at the highest since 2008, oil prices up 23 percent this year and companies trying to pass on higher input costs, the risk is growing that inflation may accelerate and slow the recovery.
“Euro-zone manufacturers reported that the growth surge continued into April, meaning 2011 has so far seen the best start to a year since the dot-com boom of 2000,” Chris Williamson, chief economist at Markit, said in a statement. “April also saw the third-highest rate of job creation over the past decade.”
The euro was higher against the dollar, trading at $1.4870 at 3:22 p.m. in London, up 0.4 percent on the day.
S-Class Sedan
Orders from China, the world’s second-biggest economy, are helping to fuel Europe’s manufacturing growth, including record demand for luxury cars from Daimler AG (DAI), Bayerische Motoren Werke AG (BMW) and Volkswagen’s Audi unit. Daimler, the world’s second- largest maker of luxury vehicles, said on April 29 that first- quarter operating profit jumped 71 percent as China boosted deliveries of the Mercedes-Benz S-Class sedan.
The increased orders from Asia are helping push down the jobless rate in Germany, Europe’s largest economy. German unemployment fell below 3 million for the first time in almost 19 years in April, suggesting that household spending will rise. The government expects the economy to expand 2.6 percent this year after last year’s record 3.6 percent growth.
China’s economic growth may moderate after the government raised interest rates and allowed faster gains in the yuan. A Chinese manufacturing index fell in April from March, China’s logistics federation and the statistics bureau said yesterday.
Supply Management
In Japan, manufacturing contracted for a second month in April in the aftermath of the March 11 earthquake. U.S. manufacturing cooled last month, according to a report today by the Institute for Supply Management.
“Euro-zone manufacturers will be hoping that global growth holds up and that economic activity is not hit significantly by extended high oil prices,” said Howard Archer, chief European economist at IHS Global Insight in London. “There is also the risk in the near term that some euro-zone industries could be hit by the problems in Japan causing supply chain disruptions, most notably in the autos sector and consumer electronics.”
A gauge of euro-area services slipped to 56.9 in April from 57.2 in the previous month, while a composite index of manufacturing and services rose to 57.8 last month from 57.6 in March, according to preliminary data released April 19. Markit will release the final numbers on May 4.
European inflation accelerated to the fastest pace in 2 1/2 years in April and confidence in the economic outlook declined, data showed last week, as surging energy prices threatened to undermine growth.
To contact the reporter on this story: Jones Hayden in Brussels at jhayden1@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
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