Euro zone factories entering 2017 in good shape, PMI shows

Manufacturers in the euro zone started 2017 on a solid footing, after ramping up activity at the fastest pace in more than five years in December and building up a burgeoning order book, a survey showed on Monday.

IHS Markit's final 2016 manufacturing Purchasing Managers' Index for the euro zone registered 54.9 in December, in line with an earlier flash estimate and its highest since April 2011.

That was above both the 50 mark which separates growth from contraction and November's 53.7. An index measuring output, which feeds into the composite PMI, jumped to a 32-month high of 56.1 from 54.1.

"Euro zone manufacturers are entering 2017 on a strong footing, having ended 2016 with a surge in production," said Chris Williamson, chief business economist at IHS Markit.

"To put the PMI data into perspective, the five-and-a-half-year high reached in December is broadly consistent with factory output growing at an impressive annual rate of approximately 4 percent."

Suggesting this month will also be strong, a new orders sub-index climbed to 55.9 from 54.4, its highest since April 2011, even though companies raised prices at the fastest rate in over five years.

"Policymakers will be doubly pleased to see the manufacturing sector's improved outlook being accompanied by rising price pressures," Williamson said.

In a surprise move last month, the European Central Bank cut asset purchases but promised protracted stimulus to aid a still-fragile recovery and bolster weak inflation.