Euro zone October factory growth near three-year high, PMI shows

November 2, 2016 11:12 AM EDT

An employee works on the automobile assembly line of Bluecar electric city cars at Renault car maker factory in Dieppe, western France, September 1, 2015. REUTERS/Philippe Wojazer/File Photo


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By Jonathan Cable

LONDON (Reuters) - Euro zone manufacturing activity accelerated at its fastest rate in nearly three years last month, supported by a buoyant performance from Germany, while inflationary pressures showed further signs of recovery, a survey found on Wednesday.

The findings will make welcome reading for policymakers at the European Central Bank, who have struggled to get growth and inflation up despite years of ultra-loose monetary policy.

Markit's final Purchasing Managers' Index (PMI) jumped to a 33-month high of 53.5 from September's 52.6, ahead of the preliminary flash reading of 53.3 and above the 50-mark that separates growth from contraction.

A sub-index measuring output, which feeds into a composite PMI due on Friday that is seen as a good overall growth indicator, climbed to 54.6 from 53.8, its highest level since April 2014.

The upturn came even though prices rose for the first time in over a year. An output price index was at a 16-month high of 50.8, up from 49.9 and its first time above 50 since August last year.

"Price pressures are coming up a bit. We would question whether that is strong enough to lead to a sustained increase in core inflation," said Stephen Brown at Capital Economics.

"It's positive, the ECB will be happy, but it's not going to be enough for it to hold off on pulling the trigger in terms of more loosening."

The ECB left policy unchanged last month but is likely to tweak its asset-purchase program and announce an extension by year-end, economists polled by Reuters said recently [ECILT/EU].

Earlier figures from Germany, Europe's largest economy, showed factory growth there was also near a three-year high. French manufacturing activity expanded at the fastest rate since March 2014.

Spanish growth also accelerated, but in Italy manufacturing activity grew at roughly the same listless rate as September, suggesting no near-term acceleration for its struggling economy.

Italian gross domestic product expanded 0.7 percent last year, less than half the rate in the 19-nation euro zone, and the government of Prime Minister Matteo Renzi forecasts a similar growth rate of 0.8 percent in 2016.

A Reuters poll last month also predicted growth of 0.8 percent this year and next. reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=ITGDPQQP

Still, suggesting the uptick across the bloc may continue towards the end of the year, new orders came in at their fastest rate in two and a half years.

(Editing by Ross Finley and Larry King)



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