The euro zone manufacturing sector grew at its fastest pace in more than five years in March, a major survey showed today.
But manufacturers remain wary of employing more staff, despite a hefty rise in backlogs of work and the strongest growth in output and new orders since August 2000, according to the RBS/NTC Research Manufacturing Purchasing Managers' Index.
The headline PMI rose to 56.1 in March - its highest level since September 2000 - from 54.5 in February.
That beat the consensus forecast of 55.0 and was well above the 50 mark that divides growth from contraction.
The euro zone survey of 3,000 manufacturers showed they boosted profit margins in March by charging higher prices for their goods, lifting the output price index to 54.4, a 13-month high, from 53.4.
"That's great for corporate profitability," said Chris Williamson at NTC Research which compiles the data. "It will cause concerns for the European Central Bank (ECB), however."
The ECB meets on Thursday and is widely expected to keep rates on hold at 2.5 per cent after two rises in the past four months. But most economists predict another hike in May, and the PMI data is likely to reinforce expectations for further rises.