Photographer: Martin Leissl/Bloomberg

Euro-Area Manufacturing Gathers Speed as Price Pressures Build

  • PMI for factories at 53.5, best reading since early 2014
  • Gauge for new orders rose to highest level since December

Euro-area manufacturing expanded in October at the fastest pace since early 2014, with strengthening demand creating room for higher prices.

A Purchasing Managers’ Index for factories rose to 53.5 from 52.6 in September, exceeding an Oct. 24 estimate of 53.3, IHS Markit said on Wednesday. A gauge for new orders rose to the highest level since December.

“The euro-zone manufacturing sector made a positive start to the final quarter,” said Rob Dobson, a senior economist at IHS Markit. “Output, new orders and new export business all rose at some of the fastest rates achieved over the past three years, building on the solid increases in quarter three and underpinning the steepest jobs growth since mid-2011.”

The region’s slow but steady recovery has ploughed forward despite headwinds including the U.K.’s vote to leave the European Union, a slowdown in global trade, and political uncertainty in the face of several upcoming elections. The European Central Bank has bought more than 1 trillion euros ($1.1 trillion) of assets to boost the economy and stoke inflation in a stimulus program that will be reviewed in December, three months before quantitative easing’s current deadline.

Growth in factory output was the steepest in 2 1/2 years in October, export orders rose in all countries covered by the report except for Greece, and a high level of backlogs bodes well for production in the future, the London-based company said. The Netherlands was the strongest manufacturer among euro-area economies, while German factory activity expanded at the quickest pace in almost three years. 

German’s jobless rate fell to 6 percent in October -- a fresh record low, separate data from the Federal Labor Agency in Nuremberg showed on Wednesday.

In a sign that inflation may be starting to edge toward the ECB’s target, IHS Markit said companies set higher selling prices for the first time since August last year, passing on to customers increased commodity costs, particularly for oil-related products. Dobson said these price pressures may be starting to trickle further along the supply chain.

Euro-area consumer prices rose at the fastest pace in more than two years in October. Even so, core inflation, which excludes volatile items such as food and energy, has failed to pick up.

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