Eurozone manufacturing growth climbs to six-year high

Euro area manufacturing activity is growing at its fastest rate in over six years, according to a survey published on Monday that showed activity improved slightly more than expected in June.

Markit's manufacturing purchasing managers' index for June was confirmed at 57.4, up slightly from the 'flash' reading of 57.3 and from May's final reading of 57.0.

With a PMI reading above 50 indicating growth, the survey confirmed the eurozone manufacturing industry expanded at its fastest in over six years in June and the average of 57 in the second quarter was also a six-year high.

Rising inflows of new work from both domestic and export clients have led to job creation remaining close to the previous month's 20-year high.

Input cost inflation has eased markedly since earlier in the year but remains elevated, with manufacturers hiking their selling prices sharply again.

Manufacturing output has improved across Germany, France, Italy, the Netherlands, Ireland and Austria, Markit said, with Greece moving back into expansion for the first time since August last year.

Austria, Germany and the Netherlands are enjoying the strongest rates of improvement, with growth picked up to a near two-year high in Ireland, accelerating in France and Italy, with only Spain failing to see its PMI level improve.

Chris Williamson, IHS Markit's chief business economist, pointed out that the PMI is indicative of factory output growing at an annual rate of some 5%, which in turn indicates the sector will have made a strong positive contribution to second quarter economic growth.

“Exports continue to play a major role in driving the expansion, increasing in recent months at rates not seen for six years, buoyed in part by the weak euro. But it’s also clear that factories are benefitting from ongoing strong demand from domestic customers.

With input cost remaining elevated, he noted that increasingly widespread supply chain shortages was leading to pricing power being regained, hinting at some upward pressures to core inflation.

He said there was "no sign" of the strong growth ending any time soon.

"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. As such, the manufacturing sector is clearly in expansion mode and looks poised for continued robust growth in coming months.”