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Eurozone Manufacturing Industry Gains Traction in January

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Eurozone Manufacturing Industry Gains Traction in January

Eurozone manufacturing activity in January expanded at the fastest pace in more than two-and-a-half years, a sign recovery in Europe is gaining traction at the start of 2014.

Markit Group’s gauge of manufacturing activity rose 0.9 percentage points to 53.9 in January, a 32 month high. Economists polled by Reuters called for 53.0.

Production output, new orders and new export orders rose for the seventh consecutive month and at the fastest pace since April 2011. A rise in demand spurred job creation for the first time since the beginning of 2012. While employment growth was modest, it was the most robust since 2011. With Eurozone unemployment hovering above 12 percent, job creation of any kind is significant.

Germany continued to anchor Eurozone recovery in January, Markit data showed. Germany’s manufacturing sector rose at the fastest pace in 32 months, driven by a sharp rise in production. Output growth in Europe’s largest economy rose at the sharpest rate since April 2011, as higher order intakes and remarkably good weather kept the manufacturing sector firing on all cylinders.

Meanwhile, output growth in France fell for the third consecutive month, albeit at a slower pace than in November and December. The rate of job losses also eased, as employment fell very modestly in January.

Euro area recovery “gained further momentum in January,” according to Chris Williamson, chief economist at Markit. “The upturn in the PMI puts the region on course for a 0.4-0.5 [percent] expansion of GDP in the first quarter, as a 0.6-0.7% expansion in Germany helps offset a flat-looking picture in France.”

In addition to robust manufacturing growth, the euro area service economy continued to gain traction in January, albeit at a slower rate than producers. Service companies reported the second-fastest rate of growth since June 2011. Markit’s gauge of Eurozone service activity rose 0.9 percentage points to 51.9, a four-month high.

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