Photographer: Balint Porneczi/Bloomberg

Euro-Area Factories Feed Best Growth Spell for Economy in Years

  • Gauge of manufacturing unexpectedly climbed in August
  • Yet momentum in services cooled to a seven-month low: Markit

Surging demand for ‘Made in the Euro Area’ goods is feeding an economy that is creating jobs and finally also seeing price growth accelerate.

A Purchasing Managers’ Index for manufacturing rose to 57.4 in August from 56.6 in July, according to IHS Markit. That’s the highest reading in two months and compares with a median estimate for a slowdown in activity. Momentum in services unexpectedly cooled to a seven-month low.

The 19-nation euro economy gathered pace in the second quarter as more countries joined the recovery. Steadily declining unemployment and business confidence at a decade high are feeding confidence that inflation -- still well below the European Central Bank’s goal -- will eventually pick up on a sustained basis.

Manufacturers recorded an “impressive” performance, with export orders surging at the fastest pace in more than six years, IHS Markit said, adding that demand in services grew at the slowest rate since January. Input costs and output prices in both sectors increased at faster rates in August.

“This is another positive set of numbers for the euro area, which continues to enjoy its best growth spell for a number of years,” said Andrew Harker, associate director at IHS Markit. A stronger intake of factory orders “bodes well for the labor market as firms will likely look to hire extra staff to deal with outstanding work.”

ECB policy makers are set to start a discussion about the future path of monetary stimulus in September, when new economic projections will be published. Asset purchases are currently scheduled to expire in December.

President Mario Draghi gave his first public speech after the summer break in southern Germany on Wednesday, before he heads to the Federal Reserve’s annual symposium in Jackson Hole, Wyoming.

— With assistance by Lucy Meakin

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