Eurozone Manufacturing Adds Jobs at Fastest Pace in 20 Years -- Update

By Paul Hannon Features Dow Jones Newswires

The eurozone's economic recovery maintained its recent, stronger momentum in May as the currency area's manufacturing sector added jobs at the fastest pace in 20 years while German businesses were more optimistic than at any time since 1991.

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Data firm IHS Markit said its composite Purchasing Managers Index for the eurozone, based on a survey of 5,000 companies, was unchanged at 56.8 in May, remaining at a six-year high. A reading above 50.0 signals an increase in activity, while a reading below signals a decline. Economists had expected the measure to fall very slightly.

Separately, Germany's Ifo Institute said its measure of business sentiment rose to 114.6 from 113.0 in April, reflecting what it described as a "euphoric" mood.

The PMIs are the first measure of activity to cover the period since pro-European centrist Emmanuel Macron was elected president of France on May 7, easily defeating the anti-euro Marine Le Pen. Mr. Macron's triumph followed March elections in the Netherlands that saw Prime Minister Mark Rutte defeat anti-euro populist candidate Geert Wilders. The French and Dutch votes reduce the threat of a breakup of the currency area, with German elections due later this year almost certain to return a pro-euro government.

The composite PMI for France rose to 57.6 from 56.6 in April, reaching its highest level for six years. The German measure also increased, hitting a 73-month high, but growth slowed in some other parts of the eurozone.

IHS Markit said the readings for April and May are consistent with quarter-to-quarter economic growth of 0.7%. If realized, that would be the fastest expansion since the first three months of 2015.

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Clemens Fuest, president of the Ifo Institute, said the confidence measure points to quarter-on-quarter growth of 0.6% in the three months to June, which would leave it unchanged from a strong start to the year.

"Economic activity in Germany remains very brisk," Mr. Fuest said.

Continued robust growth is helping create jobs, with purchasing managers at manufacturing companies reporting that workers were added to payrolls at the fastest pace in the survey's 20-year history.

"Capacity is being strained by the strength of demand, with backlogs of work showing one of the largest increases in the past six years," said Chris Williamson, IHS Markit's chief business economist. "Job creation has surged to the second-highest rate in nearly a decade as firms seek to expand capacity and meet rising demand."

The European Central Bank has increasingly stressed recently that an improved jobs market is key to its decision on when to start unwinding some of its stimulus measures, since a fall in still high levels of unemployment is expected to boost wages and inflation.

The rise in the PMI follows the release of a monthly survey by the European Commission Friday that showed consumer confidence during May was at its highest level since August 2007.

The strength of the eurozone, and particularly the German, economy is likely to add to calls for an end to ECB support for the recovery. Speaking Monday, the head of Germany's central bank said the ECB shouldn't wait too long before withdrawing its large monetary stimulus.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

May 23, 2017 06:02 ET (10:02 GMT)