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Germany leads December surge in European output

Europe's manufacturing industry grew more than initially estimated in December, powered by Germany's export-led expansion.

A gauge of manufacturing in the euro area rose to 57.1 from 55.3 the previous month, London-based Markit Economics said yesterday.

That was above the 56.8 reported earlier for December. A reading of more than 50 indicates expansion.

Germany is driving the euro region's recovery as reviving global growth boosts orders at companies including Daimler AG, encouraging investment and hiring.

German business confidence unexpectedly improved last month as declining unemployment encouraged consumer spending even as governments across the region stepped up austerity measures.

"Germany remained the star performer, seeing near-record growth, followed by France, where the PMI slipped only slightly from November's 10-year peak," Chris Williamson, chief economist at Markit, said in a statement.

"Welcome signs of recoveries were also evident in the periphery, where export sales helped boost output growth in all cases except Greece, where the rate of decline at least moderated."

A gauge of manufacturing in Germany, Europe's largest economy, rose to 60.7 in December from 58.1 the previous month, while the indicator for France slipped to 57.2 from 57.9, Markit said. A gauge for Italy advanced to 54.7 from 52.

The figures "suggest that the manufacturing recovery may be broadening out to help lift economic growth outside of the French-German core in early 2011," Mr Williamson said.

"The data are consistent with industrial production rising across the single-currency area at a quarterly rate of 2pc."


Factory activity also may be picking up in the US. Manufacturing probably grew at the fastest pace in seven months in December, economists added.

Manufacturing growth in China, meanwhile, slowed in December, partly because of tighter monetary policy. The Chinese central bank raised interest rates on December 25; six days later, the currency regulator said it was expanding a programme to let exporters keep revenue overseas.

Companies across Europe may struggle to maintain sales growth as the economy weakens. Slower exports were among the reasons the euro region's expansion weakened to 0.4pc in the third quarter from 1pc in the previous three months.

"Inventory corrections may well be generally drawing to a close across the region, while domestic demand is likely to be increasingly limited in a number of eurozone countries by tighter fiscal policy increasingly kicking," Howard Archer, of IHS Global in London, said.

"Eurozone firms will be hoping that global growth holds up well in 2011 and that the euro is at a relatively competitive level." (Bloomberg)

Irish Independent