October was strongest month for euro zone factories in almost seven years: PMI

A employee walks along a battery storage in battery factory at Daimler subsidiary ACCUMOTIVE in Kamenz
A employee walks along a battery storage in battery factory at Daimler subsidiary ACCUMOTIVE in Kamenz, Germany May 22, 2017. REUTERS/Matthias Rietschel

November 2, 2017

By Jonathan Cable

LONDON Reuters) – Manufacturers in the euro zone had their strongest month since early 2011 in October as factories struggled to meet booming demand despite adding staff at the fastest rate in at least 20 years, a survey showed on Thursday.

“Euro zone factories started the fourth quarter with increased vigour, with the sector’s growth spurt showing no sign of abating,” said Chris Williamson, chief business economist at survey compiler IHS Markit.

Economic growth in the currency bloc was a

faster-than-expected 0.6 percent last quarter and unemployment has fallen to an almost nine-year low, official data showed this week.

IHS Markit’s final manufacturing Purchasing Managers’ Index for the bloc rose to 58.5 last month from September’s 58.1. That

was below a preliminary estimate of 58.6 but was its highest since February 2011 and the second-highest in over 17 years.

An index measuring output, which feeds into a composite PMI due on Monday, dipped to 58.8 from September’s 6-1/2 year high

of 59.2 but remained well above the 50 level that separates growth from contraction. The flash estimate was 58.7.

In a sign November will also be busy, new order growth accelerated at the fastest pace since early 2011 while factories built up backlogs of work at the joint-steepest rate since IHS Markit started monitoring it 15 years ago.

To try to meet growing demand, manufacturers took on staff rapidly, with the employment sub-index registering 57.3, up from 56.5 and the highest reading in its 20-year history.

“It’s especially encouraging to see employment growing at a survey-record pace as firms seek to boost capacity in response

to fuller order books,” Williamson said.

“Export order growth remains encouragingly solid, suggesting little impact from the strengthening of the euro this year, and

domestic demand continues to improve across the region.”

Robust growth alongside increasing price pressures will be welcomed by policymakers at the European Central Bank who last

month took a step towards weaning the euro zone off loose money.