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Spain and Italy led a pickup in eurozone manufacturing activity during May, while German consumer prices rose at the fastest rate in eight months as the European Central Bank's new stimulus program appeared to yield early results.
The ECB launched a program of quantitative easing on March 9 to buy more than EUR1 trillion ($1.07 trillion) of bonds using newly created money by September 2016. Its main goal is to lift the inflation rate to just under 2%.
The program appears to have had an immediate impact. Figures released by Germany's statistics agency on Monday showed May consumer prices were 0.7% higher than a year earlier, the largest increase since October 2014.
That follows the release of figures from Italy and Belgium late last week that showed similar pickups in inflation, while in Spain the fall in prices has eased.
Economists expect that figures to be released by the European Union's statistics agency on Tuesday will record a 0.2% rise in eurozone prices from May 2014, the first increase since November.
The ECB's governing council meets Wednesday, and is expected to leave policy unchanged. The central bank's economists will release new forecasts, and may raise their projections for inflation, although only modestly.
One consequence of QE has been a weaker euro. The surveys of purchasing managers indicated that has helped manufacturers in Italy and Spain win new export orders, while also raising costs for manufacturers by lifting import prices.
Data firm Markit, which surveys more than 3,000 manufacturers across the eurozone, said on Monday that its purchasing managers index rose to 52.2 in May from 52.0 in April. Markit had previously estimated the PMI rose to 52.3. A reading below 50.0 indicates activity is declining, while a reading above that level indicates an increase.
Spain and Italy recorded significant pickups as they continued to emerge from long periods of economic decline or stagnation. The former saw activity rise at the fastest pace in 97 months, and the latter 49 months. In both countries, the weaker euro seems to be aiding exporters.
"Spain and Italy appear to be staging strong recoveries, benefiting in particular from impressive export performances," said Chris Williamson, Markit's chief economist. "Such export gains point to improved competitiveness which bodes well for longer-term economic prospects."
However, there was weakness at the eurozone's core. French manufacturing activity declined again, although at the slowest pace in a year, while German activity rose at the slowest pace in three months.
Until recently, there had been few signs the weaker euro was boosting output in the currency area. But the survey of purchasing managers recorded the strongest rise in new export orders in over a year.
The rise in new orders has given manufacturers fresh confidence to hire additional workers, which they did for the ninth straight month.
The ECB hopes the weaker euro will boost inflation by raising prices of imported goods and services. There were some signs that is beginning to happen, with purchasing managers reporting that the costs their businesses face rose for the third straight month, and at the fastest pace since April 2012. However, businesses didn't respond by raising their own prices, instead leaving them unchanged.
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