(RTTNews) - Eurozone manufacturing industry expanded for the first time in seventeen months in October, strengthening expectations that the 16-nation economy recovered from the worst recession.

The purchasing managers’ index for the region’s manufacturing sector rose to 50.7 in October from 49.3 in September, survey data released by Markit Economics showed Monday. That was unchanged from the flash estimate released on October 23 and was the highest reading since May 2008. A PMI reading above 50 suggests expansion in the sector.

“With capacity now coming into line relative to order books, and further growth of production looking likely in coming months as factories restock, conditions are set to improve further,” Markit Chief Economist Chris Williamson said.

Output increased for the third month running in October and signaled the strongest monthly expansion since January of last year. However, output disparities widened within the euro area.

According to Markit, French manufacturers reported a further marked acceleration in output growth to outperform all other euro nations by a wide margin. Germany saw the second strongest growth, as output rose at the fastest pace since June of last year, closely followed by Austria and the Netherlands, which both likewise saw growth accelerate during the month. In contrast, output fell in Spain, Ireland and Greece.

Eurozone manufacturing new orders rose by marginally more than estimated by the earlier flash reading, showing the largest monthly rise since August 2007. France and Germany reported considerably stronger increases in new orders than other countries. Only Spain, Greece and Ireland saw lower levels of new orders.

New export orders rose at a slower pace than total new orders, hampered by the strong euro. But, it recorded the largest increase since January of last year as manufacturers benefited from resurgent demand in many markets. The Netherlands, Germany, France and Austria all saw robust export order growth, but marked declines were seen in Spain, Italy and Greece.

Stocks of finished goods continued to fall at a steep pace. Inventories fell in all countries, led by Germany. Employment fell slightly less sharply than indicated by the flash report. However, the rate of job losses has eased sharply in recent months to the weakest for a year. Staffing levels fell in all countries covered by the survey, but rates of decline eased in Germany, France, Spain and Austria.

Input prices rose for the first time for a year, driven by rising commodity prices and higher rates from suppliers. The increase in prices was greater than the flash estimate. Prices charged fell for the twelfth month in a row, though the decline was less than indicated by the flash estimate and the weakest since last November. Manufacturers in all countries reported lower selling prices, though rates of decline slowed in Germany, Spain, Ireland and Austria.

“Today’s data point to a significant rebound in the manufacturing output in the coming months,” BNP Paribas economist Fr�d�rique Cerisier said.

Separate reports showed that the Markit/BME manufacturing PMI for Germany rose to 51 in October from 49.6 in September, but slightly down from the flash reading of 51.1. The PMI rose above the neutral 50.0 mark for the first time in fifteen months.

The Markit/CDAF France Manufacturing PMI jumped to near three-year high of 55.6 in October from 53 in September and a flash reading of 55.3. The Markit/ADACI manufacturing PMI for Italy stood at 49.2 in October, up from 47.6 in September.

On September 14, the European Commission said in its interim economic forecast that the Eurozone economy would grow 0.1% in the fourth quarter after a 0.2% expansion in the third quarter. The Commission is set to publish its autumn forecast tomorrow. The Eurozone economy contracted 0.2% sequentially in the second quarter. The Eurostat is due to publish flash estimate of third quarter GDP data on November 13.

The European Central Bank is expected to hold its key interest rate in its next monetary policy review on November 5 to support an economy that is showing signs of recovery. “While the strong euro, the next 12-month refi operation and weak credit growth have enough potential for an interesting Q&A session, we believe the ECB will again buy time by saying nothing,” ING senior economist Carsten Brzeski said in a note today. “Crucial decisions should only come in December.”

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Posted in Categories: Economy, Eurozone, Forex, Releases.

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