Eurozone factories had their most active month for almost three years in October, and raised their prices for the first time in more than a year, according to a survey of purchasing managers released Wednesday.
The pickup in activity suggests the eurozone's modest economic recovery may gain some momentum as 2016 draws to a close, and is another indication that the British pound's tumble after a June vote to leave the European Union has thus far had little impact on the currency area.
IHS Markit said its Purchasing Managers Index for the eurozone's manufacturing sector, which is based on a survey of 3,000 companies, rose to 53.5 from 52.6 in September. That wasup from its preliminary estimate of 53.3, and the highest since January 2014. A reading above 50.0 signals an increase in activity, while a reading below signals a decline.
Germany led the expansion, while France recorded the first increase in factory activity in eight months. Greece was the only country surveyed to record a decline in activity.
There were also signs that the pickup may be sustained over coming months. New orders rose, with export orders at their highest in more than 2¿ years, a clear indication that the Brexit vote has yet to harm trade flows between the eurozone and its second-largest overseas market.
The survey also found that businesses hired additional workers at the fastest pace since mid-2011, a sign that they expect the higher level of activity to be sustained.
In a boost for the European Central Bank, manufacturers also reported that they raised their selling prices for the first time since August 2015, responding in part to a faster rise in costs.
Although encouraging for policy makers, the surveys suggest the eurozone economy has some way to go before it breaks out of a pattern of low growth and inflation that has held since it emerged from contraction in mid-2013. Economists estimate the PMI reading is consistent with quarter-to-quarter growth of 0.4%, only a slight improvement on the 0.3% rate of expansion recorded in the three months to September.
Further ahead, economists worry that the start of talks between the U.K. and the European Union on the terms of their separation, as well as upcoming elections in France and Germany, could weaken growth next year.
"We have concerns about eurozone growth prospects in 2017," said Howard Archer, an economist at IHS Global Insight. "Indeed, we suspect that eurozone GDP growth could ease back to 1.4% in 2017 as it is likely to be increasingly hampered by political uncertainties."
Write toPaul Hannon at email@example.com
(END) Dow Jones Newswires
November 02, 2016 07:35 ET (11:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.