The rate of expansion of the eurozone manufacturing sector gathered momentum at the start of the final quarter. Growth of production, new orders, new export orders and employment all accelerated, while price pressures showed further signs of increasing.
The final Markit Eurozone Manufacturing PMI® rose to a 33-month high of 53.5 in October, up from 52.6 in September and the earlier flash estimate of 53.3. This signalled the steepest rate of improvement in operating conditions since January 2014.
The Netherlands surged to the top of the Manufacturing PMI rankings in October, with growth accelerating to a 15-month peak. Germany was also a top performer, expanding at the quickest pace in almost three years.
Austria, Spain and Ireland saw solid and improved rates of expansion at the start of the final quarter. Conditions also strengthened in France, as its headline PMI stepped back into expansion territory and reached a 31-month high. Italy eked out mild growth, albeit slower than in September, while Greece recorded a contraction for the second straight month.
Underpinning the upward movement in the eurozone Manufacturing PMI were the sharpest expansion of production since April 2014 and the second-quickest increase of total new orders over the same period. The outlook for output growth also remained positive, as backlogs of work rose to the greatest extent in 33 months.
Companies indicated that domestic and export demand improved in October. New export business rose for the fortieth successive month, with the pace of increase ticking up to its fastest in over two-and-a-half years. Almost all of the nations covered by the survey saw growth of new export orders, the exception being Greece.
The strongest expansion in new export business was registered in Germany, while France saw an increase for the first time in three months. Solid gains were also recorded by Spain and the Netherlands, while growth was comparatively mild in Italy, Austria and Ireland.
Job creation at eurozone manufacturers accelerated during October, reaching a near five-and-a-half year record. Rates of growth were strongest in Germany and the Netherlands, hitting 61- and 66-month highs respectively.
Employment also rose at a quicker pace in Italy and Greece, and returned to growth in Ireland, but slowed slightly in Austria and Spain. Staffing levels moved closer to stabilizing in France, but nonetheless fell for the eighth straight month.
October survey data pointed to rising price pressures. Input cost inflation accelerated to a 15-month high, mainly due to increased commodity prices (particularly oil-related costs). Meanwhile, output charges rose for the first time since August 2015. Firming demand permitted some pricing power, allowing manufacturers pass on part of the increase in their costs.