Euro zone factories ended 2017 growing at their fastest pace in more than two decades while performance in Asia was more uneven, with its third-largest economy India leading the field and manufacturing giant China unexpectedly resilient.
With a similar business survey covering the United States forecast to be strong, the synchronized global growth that took hold last year looks set to continue based on the first major economic data releases of 2018.
Euro zone factory activity is handily outpacing its peers, including Britain. That has added to expectations that the European Central Bank, which this month will halve its monthly bond purchases, will shutter the program later this year.
“The euro zone manufacturing boom gained further momentum in December, rounding off the best year on record and setting the scene for a strong start to 2018,” said Chris Williamson, chief business economist at IHS Markit, which compiles the surveys.
The December euro zone final manufacturing Purchasing Managers’ Index (PMI) was 60.6, matching an earlier preliminary reading, the highest since the survey began in June 1997. Any figure above 50 represents growth. The euro rose to a three-month high above $1.20.
The factory output index, which feeds into a broader set of data including services due on Thursday, rose to 62.2 from 61.0 in November. That was its highest in over 17 years and a reading exceeded only once in the survey’s more than two decades of history.
Germany and France, the euro zone’s two largest economies look to be expanding in tandem, striking their highest manufacturing PMI numbers on record and for 17 years, respectively. But growth slowed in Italy, the bloc’s third largest economy.
In Britain, which is in the process of negotiating a withdrawal from the European Union, growth tailed off sharply from a four-year high the previous month.
“Strong growth will be hard to sustain in 2018,” noted Samuel Tombs, UK economist at consultancy Pantheon Macroeconomics. He pointed out that the UK PMI had underperformed the euro zone’s by the most since June 2008.
“British manufacturers ... are failing to make the most of the rebound in global trade,” Tombs wrote.