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European factories continued to expand output in January, according a private sector reading of currency area growth, as employment surged to a nine-year high and activity hit the fastest pace since 2011.

Markit Economics composite reading of Eurozone growth edged modestly lower in January, coming in at 54.3 compared to the the five-and-a-half-year high 54.4 in December but well above the 50 mark that separates growth from contraction. However, Markit's measure of manufacturing activity rose to 55.1 (from 54.9 in December) to its highest level in 69 months as the pace of new hires accelerated firmly.

"The eurozone economy has started 2017 on a strong note. The January flash PMI is signalling respectable quarterly GDP growth of 0.4% with a broad-based expansion across both manufacturing and services," said Markit's chief economist Chris Williamson. 

"It's not all good news: with costs rising steeply due to higher commodity prices and the weak euro, while selling price growth remains subdued, margins are being squeezed to the greatest extent for over five years," Williamson noted. "However, the recent strengthening of demand is at least starting to help restore some pricing power among suppliers, hinting at an upturn in core inflationary pressures."

The euro traded modestly lower following the data, changing hands at 107.48 against the U.S. dollar, although the greenback's weakness continues to make currency pair readings difficult to assess.