The euro area manufacturing sector gained further strength in October driven by acceleration in production and new orders, final survey results from IHS Markit showed Monday.
The manufacturing Purchasing Managers’ Index rose to 54.8 in October from 53.7 in September. The flash score was 54.4. A reading above 50 indicates expansion in the sector.
Production increased for the fourth straight month, with the rate of growth sharpest for over two-and-a-half years. Likewise, new orders posted the biggest expansion since the start of 2018 reflecting higher demand from both domestic and foreign [markets][1].
Nonetheless, employment levels continued to be cut, extending the current period of contraction to a year-and-a-half.
On the price front, the survey showed that input costs advanced for the third successive month, with the rate of inflation the fastest for 20 months. Firms were able to pass on a proportion of their higher input costs to clients.
Looking ahead to future production, [business][2] confidence remained positive for a fifth successive month in October.
“The renewed weakness of consumer-facing businesses serves as a reminder that, while manufacturing as a whole may be booming for now, the sustainability of the recovery will depend on household behaviour returning to normal and labour markets strengthening,” Chris Williamson, chief business economist at IHS Markit said.
“Given second waves of virus infections, this still looks some way off,” the economist added.
Among big-four economies, Germany was again the best-performing country, with the respective PMI hitting its highest level for over two- and-a-half years.
Germany’s final manufacturing PMI climbed to 58.2 from 56.4 in September. The score was above the flash 58.0. There was a steep rise in output alongside a record growth in new orders.
Growth was only moderate in France due to a slower increase in production. The final factory PMI rose marginally to 51.3 from 51.2 a month ago. The flash reading was 51.0.
Amid quicker growth of both output and total new orders, Italy reported an acceleration in growth to a 31-month high. The factory PMI improved to 53.8 from 53.2 in September. The expected reading was 53.5.
Spain’s manufacturing PMI rose to a three-month high of 52.5 from 50.8 a month ago. The score was expected to climb to consensus 51.0.
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