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 October 24th 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 UK’s vote to leave the EU, 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 of assets to boost the economy and stoke inflation in a stimulus programme that will be reviewed in December, three months before quantitative easing's current deadline.
Factory output
Growth in factory output was the steepest in 2½ 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 per cent in October – a fresh record low – separate data from the Federal Labour 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.
