Eurozone manufacturing accelerates as orders fuel optimism

Frankfurt - Eurozone manufacturing expanded at the strongest pace in over six years as factories across the region took on more workers to deal with surging orders.

A  Purchasing Managers’ Index climbed to 57.4 in June, up from 57.0 in May and above a June 23 flash estimate, IHS Markit said on Monday. Growth rates improved in most of the surveyed countries, including France and Italy, while a gauge for Greece signaled expansion for the first time since last August.

“There’s no sign of the impressive performance ending any time soon,” said Chris Williamson, chief business economist at IHS Markit.

“Optimism about the year ahead has risen to the highest for at least five years, backlogs of orders are building up at the fastest rate for over seven years and factories are reporting near-record hiring as they struggle to deal with the upturn in demand.”

The figures underline rising confidence among policy makers that the recovery in the 19-nation economy is strengthening after years of subdued activity and muted inflation.

Unemployment data on Monday showed joblessness held at 9.3 in May, the lowest level since March 2009. With factory output rounding off the best quarter since 2011, overall economic growth in the three months through June is likely to have received a strong boost from goods production, IHS Markit said.

Improvements can also be seen on the inflation front. While input costs have fallen since the start of the year, manufacturers increased selling prices sharply, Williamson said.

“Increasingly widespread supply-chain shortages mean pricing power is being regained, hinting at some upward pressures to core inflation.”

Data on Friday showed euro-area price growth slowed less than economists predicted in June as a measure of underlying pressures that strips out volatile components such as energy and food exceeded estimates.

European Central Bank President Mario Draghi has insisted that he wants to see proof that inflation momentum is sustainable before withdrawing monetary support.

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