Euro Area Sees Price Gains as Manufacturing Picks Up Pace

  • Factory PMI gauge rises to 54.9, in line with median estimate
  • IHS Markit says outlook improved, price pressures are building

Euro-area manufacturing expanded last month at the fastest rate since April 2011, in a sign that the currency bloc’s recovery is intact heading into 2017.

A Purchasing Managers’ Index climbed to 54.9 in December, IHS Markit said on Monday. The reading matches the initial estimate on Dec. 15 and was up from 53.7 in November. Higher import costs resulting from a weaker euro, combined with increased global commodity prices, led to the sharpest inflation for average purchasing costs in more than five-and-a-half years.

The European Central Bank has extended its stimulus program until at least the end of the year as it strives to return consumer-price growth to its goal of just under 2 percent. While inflation looks set to accelerate in coming months, officials are concerned that core prices -- excluding energy and food -- have so far shown no convincing upward trend.

“Euro-zone manufacturers are entering 2017 on a strong footing, having ended 2016 with a surge in production,” said Chris Williamson, chief business economist at IHS Markit. “Policy makers will be doubly-pleased to see the manufacturing sector’s improved outlook being accompanied by rising price pressures.”

PMI readings rose in all seven of the countries in the survey, with growth strongest in the Netherlands and Austria. Germany’s gauge was at the highest in three years, France’s in more than five years, and Spain’s in 11 months. Italy’s pace of growth improved and Greece’s contraction eased.

The euro fell after German data were published and extended declines following the euro-area report. The single currency traded at $1.0480 at 10:12 a.m. Frankfurt time.

The average euro-area PMI reading over 2016 was the highest since 2010, IHS Markit said.

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