Conditions for industry continue to improve

Business conditions in manufacturing continued to improve in September, according to the latest Purchasing Managers' Index survey from NCB Stockbrokers. After a slight expansion in August, manufacturing output rose more sharply in September as both domestic and foreign orders increased.

Orders for manufacturing products, as measured by the survey, have increased for 25 months in succession.

The rise in output came in spite of the fact that in September, average costs facing manufacturers rose strongly. Input cost inflation was attributed to the influence of higher oil prices on energy costs, as well as an increase in raw material prices. But stronger competition has meant that output prices continue to grow at a modest level, according to the survey.

The picture was similar across Europe last month, according to September's euro-zone purchasing managers' indices. Conditions in Italy were the best for a year.

The rises are the latest evidence that the impact of higher oil prices and US hurricanes on business has been less than feared, and suggest the pick-up in euro-zone economic activity may have broadened beyond largely export-led growth.

Following the latest data, the European Central Bank is expected to be more upbeat on euro-zone growth after its rate-setting meeting in Athens on Thursday. But the ECB's main interest rate is expected to be left unchanged at 2 per cent until a clear acceleration in growth has become entrenched.

The euro-zone purchasing managers' index rose from 50.4 in August to 51.7 in September - the highest since February, according to the Royal Bank of Scotland and NTC Research, which publish the data. A figure above 50 indicates expansion.

In Italy, where the decline in industrial competitiveness has alarmed policymakers across Europe, the index rose to 51.5, after 50.0 in August, the highest since September last year. Germany's index, at 51.0 in September, rose above the 50 level for the first time in six months, helped largely by foreign orders.

In the UK - not part of the eurozone - the purchasing managers' index was at its highest since March, with support from growth in incoming new orders.

(Additional reporting: Financial Times Service)