June 1, 2017 / 8:14 AM / in 2 years

Euro zone manufacturing surges in May as new orders mount up

LONDON, (Reuters) - Manufacturing across the euro zone grew at the fastest rate in more than six years during May, increasing activity as price increases failed to slow their new orders, a survey showed on Thursday.

Signs the bloc’s economy is enjoying a stable and broad-based recovery, alongside inflationary pressures, will be welcomed by policymakers at the European Central Bank.

IHS Markit’s Manufacturing Purchasing Managers’ Index for the euro zone rose to 57.0 in May, up from April’s 56.7 and its

highest level since April 2011. The figure matched a preliminary reading.

An index measuring output, which feeds into a composite PMI due next week, also climbed further above the 50 mark that

separates growth from contraction. It reached 58.3, its highest in more than six years high, up from April’s 57.9.

“The euro zone upturn is developing deeper roots as factories enjoy a spring growth spurt,” said Chris Williamson,

chief business economist at IHS Markit.

“Demand for goods is growing at the steepest rate for six years, encouraging manufacturers to step up production and take

on extra staff at a rate not previously seen in the two-decade history of the PMI survey.”

A new-orders sub-index nudged up to 57.8 from 57.7, its highest since March 2011. The upturn came even though companies

raised prices last month, albeit not as sharply as they did in April.

Germany, Europe’s largest economy, led the charge, but IHS Markit said solid upturns were recorded in other countries as

well. France lagged behind but is still enjoying its best quarter for six years.

FILE PHOTO: A new Volkswagen Crafter production line is seen at the newly opened Volkswagen factory in Wrzesnia near Poznan, Poland September 9, 2016. REUTERS/Kacper Pempel

As the bloc’s economic performance improves, the ECB is likely to signal a move away from its ultra-easy monetary policy

by September, economists in a Reuters poll forecast last month.

However, consumer prices rose just 1.4 percent from a year ago in May, compared with 1.9 percent in April. That was weaker than the 1.5 percent expected in a Reuters poll and below the ECB’s 2 percent target.

Editing by Larry King

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