February 1, 2018 / 9:17 AM / 10 months ago

Euro zone manufacturing boom rolls on into new year: PMI

LONDON (Reuters) - The euro zone’s booming manufacturing industry raced into 2018, churning out goods last month at one of the fastest paces in over 20 years, a survey showed, suggesting the economic recovery still has momentum.

FILE PHOTO: A worker welds a metal furnace in a factory in Gravellona Lomellina, 45km (27 miles) southwest of Milan, June 11, 2013. REUTERS/Stefano Rellandini

In 2017 the bloc’s economy was a surprise global star and any signs the energy, alongside rising price pressures, has carried into this year will be welcomed by the European Central Bank as it moves to unwind its super-loose monetary policy.

IHS Markit’s January final manufacturing Purchasing Managers’ Index for the euro zone was 59.6, matching an earlier preliminary reading but below December’s 60.6 - which was the highest since the survey began in June 1997.

An index measuring output that feeds into a composite PMI due on Monday and seen as a good gauge of economic health did fall to 61.1 from December’s record high of 62.2 but has only been higher six times in the survey’s 20-year history.

“The euro zone’s manufacturing boom continued in full swing in January,” said Chris Williamson, chief business economist at IHS Markit.

Among the bloc’s four biggest economies, PMI readings remained close to record highs in Germany and Italy and among the best for 17 years and a decade in France and Spain respectively.

Indicating February would also be a busy month, new orders growth was at a near record pace as was employment. Firms also built up a solid backlog of work and were their most optimistic in at least 5-1/2 years.

In a development that is likely also to delight ECB policymakers, who have struggled for years to get inflation anywhere near their 2 percent target ceiling, factories increased their prices at the fastest rate since mid-2011.

Euro zone inflation dipped as expected to 1.3 percent in December, official data showed on Wednesday, although core inflation rose. The PMI sub-index measuring output prices jumped in January to 58.0 from 56.3.

Last week, the ECB decided to keep policy unchanged and held off discussing winding down its massive stimulus program, as inflation has yet to show any convincing upward trend.

The ECB will stop printing money by the end of the year, but a majority of economists polled by Reuters last month said they should do so much sooner, citing a solid and synchronized growth outlook for the currency bloc.

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