Euro-zone factory rebound spreads to Spain, Italy Recovery seen in countries hit by fiscal crisis

By Alex Brittain

A recovery in the euro-zone manufacturing sector broadened in August, as factory activity picked up in countries such as Spain and Italy that have suffered long downturns sparked by the region’s fiscal crisis.

The latest signs of growth in these countries, as well as bail-out recipient Ireland, helped euro-zone manufacturers overall grow at the fastest rate in over two years, said data provider Markit in its monthly report Monday.

Growth accelerated in Germany, the euro zone’s biggest and strongest economy, and resumed in Spain after more than two years of decline. Factory activity in crisis-hit Greece shrank, but at the slowest rate in more than three years. The French factory sector ebbed, as it did in July.

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The release adds to a growing pile of evidence that the euro-zone economy, which emerged from a shallow, 18-month downturn in April, will continue to grow in the third quarter. Growth prospects remain poor, though, as governments continue with austerity policies and consumers and businesses refrain from spending freely. Unemployment is near record highs.

Markit said the euro-zone purchasing managers’ index for manufacturing rose to 51.4 in August from 50.3 in July. The figure is a slight upward revision from the 51.3 previously announced, and pushes the sector further above the 50 index threshold that indicates month-to-month growth.

“Manufacturing in the euro area continued to show signs of recovery in August,” said Chris Williamson, chief economist at Markit. “What’s especially encouraging is that the upturn is broad-based,” he added.

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