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Eurozone Manufacturing Growth Fastest In 3 Years

Euro area manufacturing sector expanded at a faster than estimated pace in February, which was the strongest in three years as output and new orders grew sharply and export demand picked up.

The final purchasing manager's index, or PMI, for the manufacturing sector rose to 57.9 from 54.8 in January. The flash reading was 57.7.

A score above 50 suggests growth in the sector, which expanded for an eighth month in a row.

The survey that was conducted during February 11-19 also found that acute lengthening of delivery times led to the fastest cost inflation in nearly a decade. Output prices rose at the strongest rate since April 2018.

Employment in the sector grew for the first time in nearly two years.

Business optimism hit its highest level since the series began mid-2012, on hopes of a successful roll-out of vaccination programs and a resolution to the pandemic in the coming months.

Among the big four, Germany, France and Italy saw their manufacturing PMIs hit 37-month highs in February.

In Germany, the factory PMI climbed to 60.7, which was a tad higher than the flash estimate of 60.6.

The French measure rose to 56.1, which was better than the flash estimate of 55. The Italian PMI climbed to 56.9.

The Spanish PMI rose to 52.9, the highest in seven months.

"Manufacturing is appearing as an increasingly bright spot in the eurozone's economy so far this year," IHS Markit Chief Business Economist Chris Williamson said.

"The solid manufacturing expansion is clearly helping to offset ongoing virus-related weakness in many consumer-facing sectors, alleviating the impact of recent lockdown measures in many countries and helping to limit the overall pace of economic contraction," the economist said.

Williamson pointed out that the growth spurt is bringing in supply-side challenges and higher costs.

"Prices paid for inputs are consequently rising at the fastest rate for nearly a decade, hinting at further increases in consumer price inflation in coming months, at least until supply and demand come back into balance," the economist added.

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