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Euro zone manufacturing boom continues into new year

January's final manufacturing Purchasing Managers' Index for the euro zone was 59.6, below December's 60.6
January's final manufacturing Purchasing Managers' Index for the euro zone was 59.6, below December's 60.6

The euro zone's booming manufacturing industry raced into 2018, churning out goods last month at one of the fastest paces in over 20 years, suggesting the economic recovery still has momentum. 

In 2017 the euro zone's economy was a surprise global star.

Any signs the energy, alongside rising price pressures, has carried into this year will be welcomed by the European Central Bank as it moves to unwind its super-loose monetary policy. 

IHS Markit's January final manufacturing Purchasing Managers' Index for the euro zone was 59.6, matching an earlier preliminary reading but below December's 60.6 - which was the highest since the survey began in June 1997. 

An index measuring output that feeds into a composite PMI due next week and seen as a good gauge of economic health did fall to 61.1 from December's record high of 62.2.

But it has only been higher six times in the survey's 20-year history. 

"The euro zone's manufacturing boom continued in full swing in January," said Chris Williamson, chief business economist at IHS Markit. 

Among the bloc's four biggest economies, PMI readings remained close to record highs in Germany and Italy and among the best for 17 years and a decade in France and Spain respectively. 

Indicating February would also be a busy month, new orders growth was at a near record pace as was employment. 

Firms also built up a solid backlog of work and were their most optimistic in at least five and a half years. 

In a development that is likely also to delight ECB policymakers, who have struggled for years to get inflation anywhere near their 2% target ceiling, factories increased their prices at the fastest rate since mid-2011. 

Euro zone inflation dipped as expected to 1.3% in December, official data showed yesterday, although core inflation rose. 

The PMI sub-index measuring output prices jumped in January to 58 from 56.3. 

Last week, the ECB decided to keep policy unchanged and held off discussing winding down its massive stimulus programme, as inflation has yet to show any convincing upward trend. 

The ECB will stop printing money by the end of the year, but a majority of economists polled by Reuters last month said they should do so much sooner, citing a solid and synchronised growth outlook for the currency bloc.