Manufacturing rise sends euro stocks upward

Julian Harris
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SURPRISINGLY strong manufacturing growth across the Eurozone saw stock markets start the year on the up.

The opening hours of yesterday’s trading saw rises in the Euro Stoxx 50 (1.9 per cent), Germany’s DAX (1.5 per cent) and France’s CAC-40 (2.2 per cent), after it was revealed that manufacturing activity hit its highest level since last April’s 46-month peak.

The sector has now been growing for 15 straight months, according to the Purchasing Managers’ Index (PMI) compiled by Markit.

The Euro’s core economies continue to drive the recovery forwards, with Germany’s sector exceeding 60 points in the index and French PMI being revised up to 57.2 from an earlier estimate of 56.3.

All ratings above 50 signal an increase in business activity.

In 2009, Eurozone manufacturing averaged 43.3, reflecting a contraction in the industry. Yet now even troubled peripheral states such as Ireland and Spain are showing positive signs of growth.

In Ireland the index reached its highest level since last May, with new orders and employment both increasing. And finished goods inventories were very low (45.5), suggesting that much of the activity will spill into the early months of this year.

The positive outlook is reflected across the Eurozone, according to Howard Archer of IHS Global Insight.

“Robust orders and rising backlogs of work bode well for manufacturing activity early in 2011,” he said.

However, Greek factories are still reflecting the economic slump, with a negative PMI rating of 43.1 – down from 43.9 in November.

And inflationary pressures throughout the euro area in yesterday’s figures offer a further downside.

Average selling prices rose at their fastest rate since August 2008, as companies passed on sharply increasing input prices.