German, euro area manufacturing PMIs roar ahead in March, PMIs show

Factory activity in the single currency bloc accelerated sharply last month - rising at its quickest pace since 2011 - led by a core group comprised of Germany, the Netherlands and Austria, but amid rising cost pressures.

A preliminary reading from IHS Markit on its Eurozone manufacturing sector purchasing managers' index for March was confirmed at 56.2 - a 71-month high - with all of the main sub-indices close to six-year highs.

That was up from a reading of 55.4 for February and in-line with economists' forecasts.

The 'flash' German PMI was confirmed at 58.3, a 71-month high, while that for France was revised a tad lower from 53.4 to 53.3.

Italy's manufacturing PMI printed at 55.7, a 72-month high.

New export orders increased for a 45th-month running, with firms citing "improving global market conditions" with a relatively weak euro exchange rate also helping some.

Thus, all of the key business activity gauges, such as those for output, new order inflows, exports, backlogs of work and employment, were at close to six-year highs.

But so too was the number of delays to supplier deliveries.

That led IHS Markit chief business economist Chris Williamson to warn that: "These delays send a warning signal about rising inflationary pressures, as busy suppliers are often able to hike prices. Prices charged for goods leaving the factory gate are consequently rising at the fastest rate since mid-2011."

The rate of increase in purchasing costs also remained at a rate close to February’s 69-month high, driving the steepest increase in factory gate selling prices since June 2011, the survey compiler added, amid the weaker euro and rising commodity prices.

Nevertheless, not everyone was apparently quite as concerned, or at least not by inflation, with economists at Barclays telling clients early on Monday that the ECB continued to be wedged between improving growth prospects and sticky, lacklustre underlying inflation conditions.

"We continue to expect the ECB to go ahead with the normalization of monetary policy conditions but to remain careful to not overdo it," Barclays said.

On the other hand, they cautioned that "Italy could become a next catalyst for risk aversion especially in the periphery; absent voting system reform, risk of anti-euro sentiment or a hung Parliament rises."