Weaker euro helps propel euro zone factory growth to six-year high

Wed Mar 1, 2017 6:31am EST
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By Rahul Karunakar

(Reuters) - Euro zone manufacturing growth accelerated to a six-year high in February as a weaker euro helped drive strong demand for its exports, with inflationary pressure showing further signs of recovering, a business survey showed.

While the upturn in euro zone factory activity was not shared by all major economies, particularly France, prices rose faster across most countries in the region.

The IHS Markit euro zone manufacturing Purchasing Managers' Index rose to 55.4 in February -- the highest reading since April 2011 -- from 55.2 in January, although it inched down from a flash estimate of 55.5.

That reading is well above the 50 mark denoting growth and suggests a solid pickup in activity. Optimism among euro zone manufacturers about future business is also surging.

An index measuring output, which feeds into a composite PMI due out on Friday, jumped to 57.3, which was also the highest in nearly six years. The flash composite PMI suggested economic growth of 0.6 percent in the first quarter.

Separate data showed German unemployment fell more than expected in February, with the jobless rate holding at 5.9 percent, the lowest since German reunification in 1990.

"Certainly if you look at euro zone manufacturing, it is the highest for quite some time, clearly suggesting the economy is gaining is little more traction compared to where we have been over the course of recent months," said Peter Dixon, economist at Commerzbank.

"The other thing I would say is the strength of the sentiment indicator in recent months has probably outstripped the actual strength of the economy. So there are lots of positives -- but we have to be a little bit cautious."   Continued...

A man works at the assembly line in the truck production plant of truck and bus-maker MAN AG in Munich, Germany July 30, 2015. REUTERS/Michaela Rehle