Manufacturing in the euro zone put on its strongest performance in over three-and-a-half years last month, according to the Purchasing Managers' Index (PMI) published this morning
The PMI, which measures business activity in manufacturing, rose from 54.0 in April to 54.7 in May, its highest since October 2000 and confounding economists who predicted a fall to 53.8.
"The key driver of manufacturing growth remains very much the export sector," said Chris Williamson, chief economist at NTC Research, which compiles the survey of some 3,000 firms for Reuters.
"There is plenty of scope for increases in the coming months if we can get the consumer to become more confident and boost their spending in countries like Germany and Italy."
NTC said the index's reading was consistent with 2 per cent year-on-year industrial production growth.
Such a level is sustainable over the long term and backs the argument that the European Central Bank should take a wait-and-see approach on interest rates. The ECB is widely expected to hold rates steady at 2.0 per cent at its next meeting on Thursday.
The PMI survey, which covers eight euro zone countries accounting for around 92 per cent of the 12-nation bloc's manufacturing activity, showed companies benefiting from improved demand from the United States and Asia thanks to the
global upturn.
A weaker euro has helped companies tap in to foreign markets by offering competitively priced goods. The euro has retreated to around $1.21 currently from a February peak of above $1.29.
In France, where the headline PMI rose two full points to 55.5 in May, its highest since October 2000, there are signs that consumers have finally started to spend more of their cash. "Strong consumer demand and good export growth . . . helped push France to the head of the growth table," said Mr Williamson.
"Germany and Italy on the other hand are still seeing weak consumer spending and that is limiting overall growth in the euro zone."