Euro zone factories enjoy solid start to 2014, France lags again: PMI

LONDON Mon Feb 3, 2014 4:01am EST

A worker welds in a factory in Gravellona Lomellina, about 45 km (28 miles) southwest of Milan, June 11, 2013. REUTERS/Stefano Rellandini

A worker welds in a factory in Gravellona Lomellina, about 45 km (28 miles) southwest of Milan, June 11, 2013.

Credit: Reuters/Stefano Rellandini

LONDON (Reuters) - Euro zone factories enjoyed their strongest month since mid-2011 in January as new orders flooded in, prompting them to take on new staff for the first time in two years, business surveys showed on Monday.

The increase was led by a sharp pick-up in Germany and a revival in the euro zone's periphery members, but a continuing downturn in France, the bloc's second-biggest economy, remained a drag on the region.

Markit's final Eurozone Manufacturing Purchasing Managers' Index rose to 54.0 last month, pipping an earlier flash reading of 53.9 and comfortably ahead of December's 52.7. The last time it was higher was in May 2011.

A reading above 50 indicates growth in activity.

The sub-index measuring output, which feeds into a composite PMI due on Wednesday that is seen as a good guide to economic growth, rose to 56.7 from December's 54.9, in line with a flash estimate and its highest since April 2011.

"The euro zone manufacturing recovery gained significant further momentum in January, with final PMI readings for Germany, France and the region as a whole all exceeding the earlier flash estimates," said Chris Williamson, chief economist at Markit.

"Perhaps the most important development in the report is the further revival of manufacturing in the region's periphery."

Germany's PMI jumped to a 32-month high, but while France's rose to a 23-month peak it remained below the breakeven 50 mark.

New orders across the euro zone rose at their fastest pace in nearly three years and factories increased headcount to meet demand. The employment subindex rose to 51.0 from 49.9, higher than a flash 50.7 and the first time above 50 for two years.

That will provide some cheer to the European Central Bank after official data on Friday showed unemployment across the bloc was stuck near a record high of 12 percent for the third month running in December.

However, manufacturers were unable to raise prices last month as fast as they did in December, which may support some fears of deflation in the region after news consumer price inflation dropped unexpectedly in January.

(Editing by Hugh Lawson)

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