World Economy

Eurozone Manufacturing Picks Up

Eurozone Manufacturing Picks UpEurozone Manufacturing Picks Up

Manufacturing activity across the eurozone accelerated faster than previously thought last month, adding to signs the bloc’s economy is recovering, a business survey shows.

Any indication of a pick-up in growth will delight the European Central Bank, which embarked on a quantitative easing program in March, aiming to buy around 60 billion euros of bonds every month to drive up inflation and spur the recovery.

Markit’s final March manufacturing Purchasing Managers’ Index (PMI) was at a 10-month high of 52.2, beating a flash reading of 51.9. It was the 21st month it has been above the 50 mark that separates growth from contraction.

“The final PMI reading signaled slightly stronger growth of the manufacturing economy than the preliminary reading, adding further to signs that the eurozone economy is reviving after last year’s slowdown,” said Chris Williamson, Markit’s chief economist.

A sub-index measuring new export orders, which includes trade within the bloc, jumped to 52.7 from February’s 51.8, helping drive the output index – which feeds into a composite PMI due on Tuesday that is seen as a good growth indicator – to a 10-month high of 53.6.

Factories cut prices for the seventh month running to spur demand, but only marginally. Official data on Tuesday showed eurozone consumer prices fell again in March, as expected, but the decline was the smallest this year.

 Euro On Track

The euro is seen clocking up its biggest quarterly decline at the end of March since its launch in 1999 — and could fall even further over the coming months.

The currency, which is used by the 19 countries in the eurozone, continued to decline on Tuesday, reaching $1.0718. It has fallen over 11 percent against the US dollar since the start of the year, putting it on track for its steepest-ever quarterly decline.

The currency’s losses have been driven by the launch of the European Central (ECB)’s 1 trillion euro ($1.1 trillion) quantitative easing program in March. Asset purchases by the ECB increase the supply of euros in the monetary system, pushing the currency’s price lower. But a weaker euro is not necessarily a bad thing. The central bank hopes that by keeping money “cheap” it will spur companies and individuals to spend and borrow more, spurring inflation from record lows. And a lower euro can also provide a boost to the region’s exporters, as it makes their products cheaper on the global market.

The euro has also been hit by expectations that the Federal Reserve could soon raise US interest rates from record lows, which have pushed up the dollar.