Euro zone manufacturing PMI hits 2-1/2 year high in December

Euro zone factory output grew at its fastest rate since mid-2011 on the back of revival of economic activity in Germany and Italy despite weaker performance in France, according to Markit's euro zone manufacturing purchasing managers index (PMI) data released yesterday.

The PMI rose to 52.7 in December, up from 51.6 in November hitting a 31-month high and setting the stage for a good start in 2014 leaving a turbulent year behind.

A PMI value above 50 indicates growth in activity while a reading less than 50 signals contraction.

Markit chief economist Chris Williamson said, ''With producers reporting further growth of new orders, exports and backlogs of work, the stage is set for a good start to 2014.''

''It seems likely that the manufacturing sector will help drive a meaningful, albeit still modest, recovery in the wider economy,'' he added.

Most of the countries in the region indicated positive manufacturing activity showing signs of a better year ahead. However, euro zone's second-largest economy France reported a six-month low PMI of 47, down from 48.4 in November, and could pose a threat to the region's economic growth this year.

''While Germany, Italy and Spain are seeing the strongest output growth since early 2011, buoyed to varying degrees by improved export sales, France is seeing a steepening downturn, in part the result of widening export losses,'' said Williamson.

''This suggests that competitiveness is a key issue which the French manufacturing sector needs to address to catch up with its peers.''

Markit observes that there is also a slight rising trend in prices in manufacturing companies which is a positive indication.

The region's manufacturing recovery was led by euro zone's largest economy Germany, which was supported by healthy performances by several other members including Italy, Ireland and the Netherlands.

Even Spain and long-struggling Greece are making notable progress in their performance with the former returning to growth and the latter showing signs of emerging from a six-year recession.

Markit estimates euro zone's fourth quarter manufacturing growth at around 1 per cent.

Meanwhile, China's manufacturing PMI is showing signs of easing in December, registering a value of 50.5 in December, down from 50.8 in November, an HSBC survey showed yesterday.

The National Bureau of Statistics also showed a fall in the purchasing managers' index for December at 51 per cent from 51.4 in November, the lowest level since August.

The US, the world's largest economy is maintaining the manufacturing growth momentum, according to data released yesterday by the institute for supply management, a trade group tracking factory activity.

Although the US manufacturing index for December is slightly lower at 57 from 57.3 in November, that's still the second-highest in 2-1/2 years.

New orders as well as hiring also improved significantly, according to the data.