The euro zone's manufacturing sector remained buoyant last month, allowing factories to ramp up their prices at the fastest rate since at least late 2002, a business survey showed today.
The Markit Eurozone Manufacturing Purchasing Managers' Index (PMI), which records manufacturing activity across all the major euro area economies, dipped to 57.5 last month from February's near 11-year high of 59.0.
The figure was revised down from a flash reading of 57.7 but marked the index's 18th month above the 50 mark dividing growth from contraction.
But in a worrying sign for policymakers, the resurgence remained two-speed, with a weaker performance in Spain and continued sub-50 readings in Greece masked by surging output growth in Germany, Europe's largest economy.
The euro zone manufacturing PMI output index dropped to 58.5 from the previous month's 61.4 and the flash estimate of 58.9.
"Despite the slight easing since February, the data are consistent with industrial production growing at a quarterly rate of 2 per cent, spearheading the region's recovery," said Chris Williamson at data compiler Markit.
The euro zone economy grew 0.3 per cent in the final three months of 2010 but is expected to have expanded 0.5 per cent in the first quarter of this year.
Earlier data from Germany showed its manufacturing sector grew at a slightly slower pace than February's record high, while in neighbouring France growth also slowed. Spain saw a downturn in growth from February's 10-month high and Italy's PMI fell from the previous month's 11-year high.
The output price index bounced to 61.5 last month, revised up from a flash reading of 61.4, hitting its highest level since Markit began tracking such prices in November 2002.
Official data released yesterday showed consumer prices rose 2.6 per cent in March, up from 2.4 per cent in February and ahead of expectations for 2.3 per cent.
"The record jump in average prices charged for goods will further encourage the European Central Bank to increase interest rates sooner rather than later, which may drive further divergences among member states as higher borrowing costs hit already weak demand in the periphery," Mr Williamson said.
The European Central Bank is expected to raise interest rates from a record low 1.0 per cent next week and follow with a couple more hikes by the end of the year as it focuses on controlling inflation.
Reuters
