Eurozone Manufacturing Activity At 18-Month High

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Eurozone's purchasing managers' index or PMI for the manufacturing sector rose to an 18-month high in October, a flash report from Markit Economics showed Friday. The manufacturing PMI stood at 50.7 in October, up from 49.3 last month and moved into the expansion zone. Moreover, this was the eighth consecutive rise in the index.

A reading above 50 indicates an expansion, while a reading below 50 signals a contraction.

At the same time, the manufacturing output index increased to 54.1 from 51.7, the highest in 23 months. The services business activity index improved to 52.3 from 50.9 in September, standing at a 20-month high. The composite output index, which tracks activity in the private sector, and includes both manufacturing and services output, edged up to 53 from 51.1 in September. The composite index stood at a 22-month high.

Commenting on the flash PMI Chris Williamson, Chief Economist at Markit said, "The flash PMIs indicate that the Eurozone economy has entered Q4 on a strong note, with growth accelerating in both manufacturing and services."

"The data are consistent with GDP rising at a quarterly rate of around 0.4% in October. Reassuringly, job losses also slowed, and forward-looking indicators such as service sector confidence and manufacturing order-to-inventory ratios suggest that the labor market could stabilize early next year", Williamson added.

"Today's numbers could lead to new speculation about an earlier-than-expected exit for the ECB," Carsten Brzeski, Senior Economist at ING said. "However, despite all enthusiasm about the recent numbers, it is still too early to give the all-clear for the Eurozone." The central bank should sit very comfortable in its current wait-and-see position given the strong euro", the economist added.

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