Euro-Area Manufacturing Activities Jump to 6.5-year High

• Euro-Area Manufacturing Activities Jump to 6.5-year High

Euro-area manufacturing activities surged to the highest in almost 7 years in September.

The Manufacturing Purchasing Managers’ Index rose from 57.4 in July to 58.1 in September, according to IHS Markit report released on Monday. This is the highest gain in six and a half-year.

Also, job creation in the manufacturing sector rose at the fastest pace since the beginning of the survey in 1997. Meaning the Euro-area labour market remains strong and growing at a healthy pace.

The economy is on track to expand at about 2.2 percent in 2017 as central bank loose monetary policy, growing manufacturing sector and strong business confidence combine to support economic growth in the Euro-area.

“The euro-zone manufacturing boom kicked into an even higher gear in September,” said Chris Williamson, chief economist at IHS Markit. “Surging order-book growth has encouraged manufacturers to take on extra staff at a rate never previously seen in the 20-year history of the PMI survey. Despite this expansion of capacity, backlogs of incomplete work built up at a faster rate, suggesting that the hiring upturn has plenty more room to run.”

Factory growth was broad-based in all the European nations, with Greece recording its strongest growth since June 2008. However, Germany and Netherlands surged the most.

Inflation rate remains stable at 1.5 percent, below the European Central Bank’s 2 percent target but broad-based growth has started pressuring prices even with stronger Euro currency.

“The stronger euro has so far barely dented export growth and domestic demand conditions were generally seen to have improved,” said Williamson. “With the upturn being accompanied by rising inflationary pressures, expectations of an imminent announcement from the ECB in relation to tapering of policy stimulus will intensify.”

The European Central Bank will hold its next monetary policy meeting on Wednesday to provide details on how to unwind stimulus.