Euro zone factory growth hits two-decade high

LONDON • Euro zone factories ended 2017 growing at their fastest pace in more than two decades.

With a similar business survey covering the United States forecast to be strong, the synchronised global growth that took hold last year looks set to continue based on the first major economic data releases of this year.

Euro zone factory activity is handily outpacing its peers, including Britain. That has added to expectations that the European Central Bank, which this month will halve its monthly bond purchases, will shutter the programme this year.

"The euro zone manufacturing boom gained further momentum in December, rounding off the best year on record and setting the scene for a strong start to 2018," said Mr Chris Williamson, chief business economist at IHS Markit, which compiles the surveys.

The December euro zone final manufacturing Purchasing Managers' Index (PMI) was 60.6, matching an earlier preliminary reading, the highest since the survey began in June 1997. Any figure above 50 represents growth.

The euro rose to a three-month high above US$1.20.

The factory output index, which feeds into a broader set of data including services due tomorrow, rose to 62.2 from 61.0 in November. That was its highest in over 17 years and a reading exceeded only once in the survey's more than two decades of history.

Germany and France, the euro zone's two largest economies, posted their highest manufacturing PMI data on record and for 17 years, respectively. But growth slowed in Italy, the bloc's third largest economy.

In Britain, which is in the process of negotiating a withdrawal from the European Union, growth tailed off sharply from a four-year high the previous month.

"Strong growth will be hard to sustain in 2018," noted Mr Samuel Tombs, UK economist at consultancy Pantheon Macroeconomics. He pointed out that the UK PMI had underperformed the euro zone's by the most since June 2008.

"British manufacturers... are failing to make the most of the rebound in global trade," Mr Tombs wrote.


A version of this article appeared in the print edition of The Straits Times on January 03, 2018, with the headline 'Euro zone factory growth hits two-decade high'. Print Edition | Subscribe