Eurozone manufacturing resumes growth after two years contracting

Eurozone manufacturing expanded at a faster pace than initially estimated in July as the industry resumed growth after two years of contraction amid increasing signs the economy is pulling out of a record-long recession.

A manufacturing index based on a survey of purchasing managers in the industry increased to 50.3 last month, topping the 50 mark for the first time since July 2011, London-based Markit Economics said yesterday.

A reading above 50 indicates growth. The July reading was up from 48.8 in June and above an earlier estimate of 50.1 on Jul 24.

Europe’s economy is forecast to return to growth this quarter after being mired in a recession for more than a year. Economic confidence among executives and consumers improved in July to a 15-month high, while manufacturers’ capacity utilisation is at the highest in more than a year.

“Eurozone manufacturing made a positive start to the third quarter,” Rob Dobson, senior economist at Markit, said in the report. “This hopefully places the sector nicely to provide a positive spur to the third quarter GDP numbers and help the euro area exit recession.”

European Central Bank president Mario Draghi has pledged to keep interest rates low for an “extended period” to encourage a recovery.

In China manufacturing gauges gave a mixed picture.

Gross domestic product in the eurozone economy, which has contracted for six quarters, probably stagnated in the three months through June and is projected to return to growth in the current quarter, according to a Bloomberg survey of economists. The International Monetary Fund forecasts the bloc’s economy will shrink 0.6% this year.

— Bloomberg