July 3, 2017 / 8:07 AM / 2 years ago

Euro zone factories round off first half of 2017 on six-year high: PMI

LONDON, July 3 (Reuters) - Factories across the euro zone rounded off the first half of 2017 by ramping up activity at the fastest rate for over six years as rising prices failed to put a dent in orders, a survey showed on Monday.

IHS Markit’s Manufacturing Purchasing Managers’ Index for the euro zone rose to 57.4 in June, up from May’s 57.0 and pipping the preliminary reading of 57.3.

June’s reading was the highest since April 2011 and was comfortably above the 50 level that separates growth from contraction.

An index measuring output, which feeds into a composite PMI due on Wednesday, jumped to 58.7 from 58.3 - a level not seen in over six years.

“Euro zone manufacturing growth gained further momentum in June, rounding off the best quarter for just over six years,” said Chris Williamson, chief business economist at IHS Markit.

Suggesting the momentum will continue into the second half, new orders rose at the fastest rate since early 2011, backlogs of work increased at the fastest pace in over 13 years, raw materials were depleted and factories increased headcount at a near record pace.

That meant manufacturers were at their most optimistic for at least five years. The future output index, which gauges expectations, soared to 67.4 from 66.0 - the highest level in the sub-index’s history.

FILE PHOTO: Finished cars are stored at the SEAT factory in Martorell, near Barcelona, Spain March 24, 2017. REUTERS/Albert Gea/File Photo

“There’s no sign of the impressive performance ending any time soon. The manufacturing sector is clearly in expansion mode and looks poised for continued robust growth in coming months,” Williamson said.

The upturn came alongside factories increasing prices, as they have done for nine months, welcome news to policymakers at the European Central Bank who have been battling for years to get inflation to their 2 percent target ceiling.

Inflation was a stronger-than-expected 1.3 percent in June, official flash data showed on Friday, and while still below target the strong economic data of late meant ECB chief Mario Draghi last week raised the prospect of policy-tightening.

Reporting by Jonathan Cable; Editing by Toby Chopra

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