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Eurozone Manufacturing Adds Jobs at Fastest Pace in 20 Years

23 May 2017

The flash composite output index came in at 56.8 in May, unchanged from April's six-year high.

Financial information company IHS Markit says Tuesday that its purchasing managers' index - a broad gauge of economic activity - for the eurozone was unchanged at 56.8 in May. Readings above 50 generally indicated economic growth.

The PMI readings point to the strongest quarter of German growth since the first half of 2011, when the Eurozone debt crisis stymied expansion around the bloc. Official data showed the economy grew 0.5% (2.2% annualised), leaving GDP 1.6% higher than a year ago.

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"Although growth is being maintained at a decent clip, reports of "wait-and-see" attitudes amongst clients, excess warehouse inventories, and recent sharp rises in raw material costs all served to undermine expansion during the month", said Paul Smith, senior economist at IHS Markit, which compiles the survey.

Germany's private sector grew at the fastest pace in more than six years, and Ifo said business morale brightened more than expected, suggesting Europe's biggest economy will carry its robust upswing into the second quarter.

Demonstrating their confidence about the months ahead, factories increased headcount at the fastest rate in the 20-year history of the survey.

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"The consensus forecast of 0.4 percent second quarter growth could well prove overly pessimistic if the PMI holds its elevated level in June", the economist added. The German measure also increased, hitting a 73-month high, but growth slowed in some other parts of the eurozone.

Manufacturing saw its index drop slightly however, falling to 54.0 from 55.1, undershooting expectations for a slight increase to 55.2. A Reuters poll said the manufacturing PMI would fall to 56.5 but it instead climbed to 57.0 from 56.7, its highest since April 2011. Chances are strong growth will continue - the business expectations index bounced to 68.1 from 67.2, its highest since early 2011.

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