Euro zone factory recovery broadens

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London - The recovery in euro zone manufacturing accelerated at the start of the second quarter but factories cut goods prices for a second straight month, a business survey showed on Friday.

Growth was again led by Germany, Europe's largest economy, and while previously-struggling companies in Spain and Italy reported expansion, French manufacturing remained weak.

Markit's final Eurozone Manufacturing Purchasing Managers' Index rose to 53.4 last month from March's 53.0.

That was slightly better than an earlier flash reading of 53.3 and marked the tenth month the index has been above the 50 level that separates growth from contraction.

The manufacturing output index, which forms part of the overall Composite PMI due on Tuesday, jumped to 56.5 from 55.6, in line with the flash reading.

“The euro zone PMI paints a promising picture for the region's manufacturers at the start of the second quarter,” said Chris Williamson, chief economist at Markit.

“The recovery is becoming more broad-based and therefore hopefully more sustainable, as rising demand from each member state feeds growth in other countries.”

An earlier PMI from Germany showed improving growth. Italy's PMI soared to a three-year high and Spain's slipped just one basis point from March's near four-year high.

France's main index slumped to 51.2 from 52.1, although still holding above the break-even level for a second month.

Also of concern to the European Central Bank's Governing Council, which meets next week to set monetary policy, factories discounted prices for the second month running - and at a slightly steeper pace.

The output price index fall to 49.2 from 49.3 follows flash data on Wednesday that showed euro zone inflation rose to only 0.7 percent last month from 0.5 percent the month before, still well below the ECB's 2 percent target ceiling.

“With factory gate prices falling for a second month running, policymakers will remain concerned about deflationary forces,” Williamson said.

Reuters


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