Eurozone Manufacturing Activity Picks Up

        Manufacturing activity in the eurozone grew more rapidly during March than first estimated and at the fastest pace in 10 months, according to surveys of purchasing managers, while the weaker euro boosted new orders from overseas buyers.
        The surveys showed that the weakening currency has also raised costs for manufacturers by lifting import prices, but businesses nevertheless continued to cut the prices they charged, an indication that the European Central Bank faces a long struggle to raise the currency area's inflation rate back to its target of just under 2.0%.
        Data firm Markit, which surveys more than 3,000 manufacturers across the eurozone, said on Wednesday that its purchasing managers index rose to 52.2 in March from 51.0 in February. Markit had previously estimated the PMI rose to 51.9. A reading below 50.0 indicates activity is declining, while a reading above that level indicates it is increasing.
        However, the pickup in activity wasn't consistent across the currency area, with France, Austria and Greece registering declines.
        The ECB on March 9 launched a program of quantitative easing in which it will buy more than EUR1 trillion ($1.07 trillion) of bonds using newly created money by September 2016. Its main goal is to lift the inflation rate to just under 2%. In March, consumer prices were 0.1% lower than a year earlier.
        One effect of the new program has been to hasten the euro's depreciation against the U.S. dollar and other major currencies, which began in May 2014.
        Until recently, there have been few signs the weaker euro was boosting output in the currency area. Exports in January were the same as a year earlier, while industrial production fell in the same month.
        That may be about to change, with the survey of purchasing managers recording the strongest rise in new export orders since April 2014.
        "Producers are benefiting from the weaker euro, which has had the dual effect of boosting competitiveness in export markets as well as making competing imports more expensive in the home markets," said Chris Williamson, Markit's chief economist.
        The rise in new orders has given manufacturers fresh confidence to hire additional workers, which they did at the fastest pace in 43 months. That will help reduce the eurozone's unemployment rate, which remains near record highs at 11.3%, with a quarter of people out of work in some Southern European countries.
        The ECB hopes the weaker euro will boost inflation by raising prices of imported goods and services. There were some signs that was beginning to happen, with purchasing managers reporting that the costs their businesses rose for the first time after six months of decline.
        However, businesses didn't respond by raising their own prices, instead cutting them for the seventh straight month, albeit at the slowest pace during that period.
        Write to Paul Hannon at paul.hannon@wsj.com
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        (END) Dow Jones Newswires

        April 01, 2015 05:10 ET (09:10 GMT)

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