Tags: Europe Factories Price Growth Fastest in 3 Years

Europe Factories' Price Growth Fastest in 3 Years

Tuesday, 19 Apr 2011 10:49 AM

Growth in the euro zone services sector slowed slightly this month but factories ramped up production, with prices rising at the fast monthly rate in three years, purchasing managers' surveys showed on Tuesday.

The April data showed the fastest pace of job growth since late 2007, but also highlighted that business activity in Germany and France continued to outpace the rest of the common currency bloc.

"Employment should help sustain robust broad-based economic growth in coming months," said Chris Williamson, chief economist at data compiler Markit, although he noted that growth remained too dependent on the euro zone's two largest economies.

"Less welcome was the news on inflation, with prices charged for goods and services showing the largest monthly jump since the all-time high seen during the oil price peak of 2008.

The Flash Markit Eurozone Services Purchasing Managers' Index (PMI) slipped to 56.9 in April from the previous month's near 4-year high of 57.2, in line with consensus.

This is the 20th month the index, which measures the activities of companies ranging from banks to hotels, has been above the 50 mark that divides growth from contraction.

The flash manufacturing PMI rose to 57.7 from 57.5 in March, confounding consensus expectations in a Reuters poll for a fall to 57.0, while the output index bounced to 60.0 from 58.5.

The euro zone composite PMI, a broader measure of the private sector which combines the services and manufacturing data, nudged up to 57.8 from March's 57.6, beating forecasts for a fall to 57.1.

The composite index is often used as a guide to growth and Markit said it was at similar levels to the first three months of the year and pointed towards quarterly economic growth of 0.8 percent in the second quarter.

Analysts polled by Reuters last week predicted second quarter growth of 0.4 percent for the euro zone economy.

Inflation Pressure Accelerates

Inflation pressure is picking up across the euro zone economy even as input cost rises eased somewhat.

This will be noted by the European Central Bank, which raised interest rates this month for the first time since July 2008.

Indeed, the service sector output price index rose to its highest since then, up nearly a full point to 53.2. This happened as input price rises cooled in manufacturing. That sub-index fell to 79.6 from 82.2.

But this was still the third-highest reading in the survey's 14-year history, exceeded only by those in the prior two months, Markit said.

Official euro zone data showed inflation rose to 2.7 percent in March, considerably above the ECB's 2 percent target ceiling.

Hiring accelerated this month to its strongest pace since November 2007, the PMI showed, with the composite employment index rising to 53.6 from 53.1.

Unemployment in the euro zone dipped to 9.9 percent in February after holding steady at 10 percent in January.

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Growth in the euro zone services sector slowed slightly this month but factories ramped up production, with prices rising at the fast monthly rate in three years, purchasing managers' surveys showed on Tuesday. The April data showed the fastest pace of job growth since...
Europe Factories Price Growth Fastest in 3 Years
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2011-49-19
Tuesday, 19 Apr 2011 10:49 AM
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