Euro zone manufacturing sees strong growth in January

Manufacturing activity in the 17-member euro zone exceeded expectations in January after the Markit Purchasing Managers’ Index (PMI) posted a reading of 57.3 in January – climbing steadily from December’s 57.1.

The index continues to remain above the crucial 50 level which indicates expansion and the PMI has been above this level for 16 consecutive months.

The growth was boosted by the euro zone’s eight biggest economies, which all saw a rise in manufacturing activity last month.

Germany’s PMI remained flat December’s five-month high, while France’s PMI fell as growth in activity slowed.

However, Italy saw the first growth in manufacturing since June 2006, while Spain’s index rose to the highest level since April 2010.

Following the news, the euro was up against the dollar to 1.3720.

Commenting on the figure, Chris Williamson, chief economist at Markit, said: “The data also show a reassuring improvement in the periphery, for manufacturing at least, with Ireland and Italy in particular seeing growth leap higher in January.”

He added: “Manufacturing continued to act as an important driver of economic growth at the start of 2011.”

In related news, the European Union’s statistics office Eurostat yesterday revealed inflation in the euro zone rose more than expected in January.

Inflation rose 2.4% on an annual basis in January, up from 2.2% the previous month and continues to exceed the European Central Bank’s (ECB) target of just below 2%.

According to economists, the increase was attributed to higher energy, commodity and food prices.

The latest figures will put pressure on the ECB to lift interest rates from their record low of 1%.