(Bloomberg) -- Manufacturing in the euro zone expanded at the fastest pace in more than two years thanks to a strong upturn in Germany, with a sharp pickup in trade helping to pull the economy out of the coronavirus recession.
While Asia's factories displayed fitful progress in September, the euro area saw output, new orders and confidence in business prospects all improve, according to an IHS Markit survey. At the same time, companies in the region continued to cut jobs -- the latest sign that they remain skeptical that the current pace of recovery can be maintained.
After a sharp initial rebound following the end of lockdowns, growth momentum in Europe has slowed recently, with resurgent infections raising the risk of more restrictions on travel and movement. While European Central Bank officials expect the economic recovery to continue, they've also warned that progress will be slow and uneven across the 19-nation bloc.
Germany was responsible for around half of the gains in euro-area manufacturing. Activity expanded more moderately elsewhere in the region, and stalled in Greece and Ireland.
With southern European countries bearing the brunt of the pandemic and given the uncertain outlook, “we should maintain a significant amount of monetary stimulus until we achieve solid recovery,” ECB Governing Council member Pablo Hernandez de Cos said on Thursday.
“We are willing to recalibrate measures we have already introduce or to introduce new measures if it were necessary,” he added.
The euro was little changed following the release of the data, and was at 1.1725 as of 10:40 a.m. in Frankfurt.
Challenging Asia
In Asia, PMI reports provided a mixed picture: India's factory gauge jumped to the highest in more than eight years, and Japan's manufacturing contraction eased, but readings for Indonesia and Malaysia declined.
Conditions across Southeast Asia's manufacturing sectors “remained challenging at the end of the third quarter,” said Lewis Cooper, an economist at IHS Markit.
China's economic activity continued to gain momentum in September, with stronger readings in both the manufacturing and non-manufacturing purchasing managers' indexes, according to the National Bureau of Statistics. A sub-index of new export orders expanded for the first time this year.
The OECD recently upgraded its global economic outlook, saying this year's slump won't be as deep as previously feared. But it also cautioned the recovery has now slowed, making fiscal and monetary support necessary also in 2021.
In the euro area, sectors outside manufacturing have struggled lately. Services providers -- particularly those in hospitality -- are reeling under new curbs on public gatherings introduced across the euro zone to contain the virus.
“Without a more broad-based recovery, the sustainability of the upturn looks at risk,” said Chris Williamson, an IHS Markit economist.
The ECB is widely expected to boost stimulus this year, with most economists predicting an increase in the 1.35 trillion-euro ($1.6 trillion) asset-purchase program in December.
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