Euro zone manufacturing activity grew at its fastest rate since the end of 2006 while the larger service sector expanded at its quickest pace in over two years, according to new surveys.
Markit's Purchasing Managers' Indexes for the 16-nation euro zone showed a bumper month as manufacturing activity in Germany, its biggest economy, expanded at the fastest rate in 10 years while French industry grew at the quickest rate in more than three years.
The euro zone's manufacturing sector drove a large part of the bloc's return to growth in the third quarter of last year and expanded at its fastest pace since December 2006 in March.
Markit's Eurozone Flash Manufacturing index jumped to 56.3 in March from 54.2 last month, beating forecasts for 54.0, while the output index climbed from 57.0 in February to 59.7 this month, a level it has only beaten once since July 2000.
The services PMI, made up of surveys of around 2,000 businesses ranging from banks to hotels, bounced to 53.7 in March from 51.8 in February, its highest since November 2007.
This is the seventh month the index has been above the 50.0 mark that divides growth from contraction and smashed consensus expectations in a Reuters poll for 52.0, but markets were unmoved on the data.
The composite index, made up from the services and manufacturing sectors and often used to predict overall growth, rallied to a 31-month high of 55.5 from 53.7 in February, outstripping the 53.8 predicted.
The euro zone economy escaped from its worst post-war recession in the third quarter of 2009 but only just grew in the fourth quarter.
Markit also said the PMI figures were consistent with growth in 2010's first quarter of 0.5 per cent.
Germany saw activity in its service sector expand at a rate not seen since April 2008, while the manufacturing sector reached its highest level since April 2000, and its second best month in the survey's 14-year history.
German business sentiment surged in March to it highest level since June 2008, the Munich-based Ifo think tank said today, also pointing to a strong improvement in the recovery.
In neighbouring France, the manufacturing PMI reached a level not seen since 2006 but its service sector index fell to 53.0 from February's 54.6. Things may improve further in the second quarter with the euro zone's services business expectations just shy of a 44-month high seen in September.
The new business index climbed to 54.3 this month, not seen since October 2007 and considerably above February's 51.9.
In the euro zone's manufacturing sector the new export orders index jumped to 58.4 from February's 56.0, a near 4-year high, boosted by a global economy emerging from recession and a weakened euro.
The euro has suffered in recent weeks on worries over Greece's debt crisis and the country's ability to secure financial aid.
The composite employment index remained below the break-even point for the 21st month but approached stabilisation at 48.6, a 19-month high. Economists say continually rising unemployment will provide a drag on economic growth.
Official data released earlier this month showed unemployment in the euro zone held steady at 9.9 per cent in January.
"Backlogs are moving, running at their fastest pace since August 2007, and that movement tends to lead the employment data, so on that basis by the third quarter we should be seeing some improvement in employment," Chris Williamson at Markit said.
Reuters