Euro zone manufacturing expanded at its fastest pace in nearly four years last month as new orders bounced and factory output rose although rising cost pressures squeezed margins, a survey showed today.
The HCOB euro zone Manufacturing Purchasing Managers' Index, compiled by S&P Global, climbed to 50.8 in February from 49.5 in January, marking its highest reading since June 2020 and the first time above the 50 threshold since August.
PMI readings higher than 50 indicate growth in activity.
"This seems to be a broad-based recovery of the euro zone manufacturing sector, with six out of the eight surveyed countries now in growth territory," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
The upturn was driven by the strongest rise in new orders since April 2022, with demand in positive territory for only the second time in nearly four years. Factory output also expanded for the 11th time in 12 months, reaching a six-month high.
Germany led the recovery by returning to growth for the first time in three-and-a-half years. Italy, the Netherlands, Ireland and Greece also posted solid expansions.
France was the only major economy to slow, with manufacturing broadly stalling after January's solid upturn, while Spain stagnated and Austria saw a marginal deterioration.
Export orders remained weak but contracted at the mildest pace in three months, suggesting demand was stabilising.
However, inflationary pressures intensified sharply. Input costs rose at the fastest rate in 38 months as companies reported higher energy prices.
Manufacturers raised their selling prices at the steepest pace since March 2023.
Despite the challenges, business confidence surged to a four-year high with companies more optimistic about year-ahead growth prospects.
Factory employment continued to decline across the euro zone, extending a trend since June 2023, though the pace of job losses moderated.
