A forward-looking gauge of the eurozone manufacturing sector jumped more than expected at the start of the fourth quarter thanks to an unexpectedly strong turnout from Spain and fast growth in the Netherlands.
Markit said on Wednesday that its eurozone manufacturing sector PMI rose to a 33-month high of 53.5 in October, above its initial 53.3 forecast and up from 52.6 in September. Any reading over 50 denotes economic expansion.
The rise came despite a tweak downwards in the German manufacturing PMI after the Spanish index, for which Markit doesn't release a preliminary estimate, rose more than expected to a four-month high of 53.3 from 52.3. The corresponding Italian PMI unexpectedly slowed to 50.9 from 51.0, however, compared with forecasts for a 51.4 reading, with the survey revealing weak order-book growth though rising manufacturing employment. Markit pegged the Netherlands as the top eurozone performer.
Markit's final October German manufacturing PMI was 55, a 33-month high despite being 0.1 point lower than its initial estimate. The German index revealed the strongest pace of job creation for five years and corresponding figures for October from the Federal Labor Office backed that finding. The Labor Office reported on Wednesday that the German unemployment rate unexpectedly declined to a post-reunification low of 6.0% from 6.1%, as jobless rolls shrank by 13,000.
The indicators, taken together, represent an encouraging start to the fourth quarter after news on Monday that eurozone economic growth stagnated in the third quarter, as expected, at 0.3%. On Friday Spain's domestic statistics office said the Spanish economy had expanded by 0.7% in the third quarter, compared with just 0.2% growth for France. Germany has yet to give its own third-quarter growth figures.
"The eurozone manufacturing sector made a positive start to the final quarter. Output, new orders and new export business all rose at some of the fastest rates achieved over the past three years, building on the solid increases in quarter three and underpinning the steepest jobs growth since mid-2011," said Rob Dobson, senior economist at Markit.
However, inflation data out this week showed the European Central Bank still has a long way to go to reach its 2% price-growth target, with preliminary October consumer price figures pointing to a eurozone inflation rate of 0.5%, up from 0.4%. The October figure was the highest rate in more than two years and reflected a lessening of the downward-drag efffect of plunging energy prices.
In further positive news for the ECB, the Markit report on Wednesday noted that inflationary pressures in the manufacturing sector showed signs of recovery in October.
The euro was recently up 0.24% against the dollar at $1.1081. The 10-year German government bond yield was recently down 4 basis points at 0.13%.