Euro zone manufacturing flying high in July: PMI

FILE PHOTO: Workers assemble a VW e-Golf electric car in Dresden
FILE PHOTO: Workers assemble an e-Golf electric car at the new production line of the Transparent Factory of German carmaker Volkswagen in Dresden, Germany March 30, 2017. REUTERS/Fabrizio Bensch/File Photo

August 1, 2017

By Jonathan Cable

LONDON, Aug 1 (Reuters) – Factories in the euro zone started the second half with buoyant growth, which although slightly weaker than previously estimated was broad-based and appears to be sustainable, a survey showed on Tuesday.

IHS Markit’s final manufacturing Purchasing Managers’ Index dipped to 56.6 from June’s six-year high of 57.4, slightly down from a flash estimate of 56.8. Any reading above 50 indicates growth.

An output index that feeds into a composite PMI due on Thursday fell to 56.5 from 58.7, which was the highest since April 2011.

“Euro zone factories were buzzing with activity again in July,” said Chris Williamson, chief business economist at IHS Markit.

“The PMI came in slightly below the earlier flash estimate, slipping to a four-month low, but this is still an encouragingly buoyant reading.”

New orders remained firm, backlogs of work built up and hiring was strong, suggesting August will remain lively. The expansion came despite factories increasing prices for the 10th month.

The output price index was 53.7, down from June’s 54.3 but comfortably above the breakeven mark – welcome news to the European Central Bank, which has struggled to get inflation anywhere near its 2 percent target ceiling.

Prices rose 1.3 percent last month, official data showed on Monday, while unemployment in June dropped to its lowest level since 2009, confirming the economy’s robust recovery and giving the ECB more ground for tightening its monetary policy in the autumn.

In September, the ECB is likely to announce a shift away from its ultra-easy policy, according to a Reuters poll.

(Editing by Hugh Lawson)