Euro zone manufacturing grew at its fastest pace in nearly six years in June on the back of strong domestic demand in Germany and Italy, a major survey showed today.
Chris Williamson, NTC Research
The RBS/NTC Eurozone Purchasing Managers' Index, based on a survey of 3,000 companies, is likely to underpin expectations that the European Central Bank (ECB) will continue, and possibly accelerate, the series of interest rate rises it started in December.
The main index rose to 57.7 in June from 57.0 in May, its highest level since August 2000, well above the 50 mark that separates growth from contraction, and above the consensus forecast of 57.4.
"It's a very strong month . . . driven by increased rates of growth of output orders and employment in particular," said Chris Williamson at NTC Research, which compiles the data. "Higher prices as well as faster growth are a key recipe for a rate tightening."
Rising oil prices and supply shortages in raw materials pushed up manufacturers' costs, and the input price index rose for the third consecutive month to 71.5 from 71.1 in May.
Manufacturers also grew more confident that their customers would accept rising costs.
The output price index rose to 56.0 in June - the fastest pace since data for that series were first collected in late 2002 - from 55.6 in May.
Mr Williamson said the euro zone's export-led recovery was boosting local consumer and business confidence, feeding through to higher domestic spending.
Germany showed the strongest growth among the major euro zone economies. Its main index rose to 59.5 in June from 58.5 in May, while Italy's went to 57.5 from 56.6 in May, the highest levels in six years in both countries.
"Consumers and businesses are showing increasing signs of being prepared to pay more for goods and that's probably going to be a concern at the ECB," Mr Williamson said.