Euro-Area Manufacturing Picks Up as Inflation Pressures Build

(Bloomberg) -- Euro-area manufacturing accelerated for a sixth month in February amid signs that inflation pressures may be starting to build as factories struggle to keep up with demand.

A Purchasing Managers' Index climbed to 55.4, IHS Markit said on Wednesday. The reading compares with a flash estimate of 55.5 and is up from 55.2 in January. Companies raised output charges at the fastest pace in more than five years as higher commodity prices and a weaker euro drove up costs, while suppliers took longer to fill orders, the London-based company said.

The report follows a series of strong data suggesting the currency bloc's economy is gathering momentum even amid heightened political uncertainty. The European Central Bank may start debating an exit strategy from unconventional stimulus next week as inflation is approaching its goal of just below 2 percent.

“Euro-area manufacturers are reporting the strongest production and order-book growth for almost six years, in what's looking like an increasingly robust upturn,” said Chris Williamson, chief economist at IHS Markit. “There's also growing evidence of a sellers' market developing for many goods as demand exceeds supply, which suggests core inflationary pressures may be starting to rise.”

Manufacturing expanded in all of the region's major economies, with activity strongest in the Netherlands, Austria and Germany. Greek output contracted.

Data on Thursday will show the euro area's inflation rate rose to 1.9 percent in February, according to a Bloomberg survey. Unemployment probably remained unchanged at 9.6 percent in January, the lowest level since 2009, a separate poll showed.

“Given the current buoyant demand environment, manufacturers are eschewing political uncertainty and quietly getting on with growing their businesses,” said Williamson. “Companies clearly expect the good times to persist.”

--With assistance from Mark Evans and Andre Tartar

To contact the reporter on this story: Alessandro Speciale in Frankfurt at aspeciale@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jana Randow, Zoe Schneeweiss