BERLIN, Feb 2 - The pace of growth in German manufacturing activity held at a three-year high in January, a survey showed on Monday, as output expanded at its fastest pace since January 2001. The BME/ Purchasing Managers' Index, based on a survey of 400 companies, was unchanged from December at aseasonally adjusted 53.0, remaining above the 50 mark that separates expansion from contraction for a fifth month. A sub-index measuring output rose to 55.1 from 54.9, while another for new orders signalled a seventh straight month of growth. "The gains in new orders were in line with ongoing economic recovery in some of the world's key markets which helped to boost client sentiment and activity," said Chris Williamson, head of economics at NTC, which conducted the survey. "Data specifically focused on new export business also showed strong growth in January," Williamson added. "Panellists made particular mention of strength from the U.S., Asia and Eastern Europe, despite a further appreciation of the euro." The strength of Europe's common currency, which last month rose to a record high of nearly $1.29, has put pressure on some companies to cut prices to compete with relatively cheaper foreign competition, the survey showed. An index measuring output prices remained below the no-change level of 50 in January, as it has done every month since data were first collected in September 2002. Meanwhile, the survey showed that although the strong euro has helped hold down the cost of raw materials paid for in dollars, rising demand and high oil prices pushed up average input prices.
RECOVERY BROADENS
The January survey results showing manufacturing growth and surging orders add to evidence that a recovery in Europe's biggest economy is broadening. Data released on Friday by the European Commission from its quarterly survey of EU manufacturing showed capacity use in German manufacturing dipping slightly to 82.8 in the first quarter of 2004 from 82.9 percent the previous quarter but still 0.5 percent higher than a year ago. German business confidence rose more than expected in January, according to the closely-watched Ifo business climate index, which rose for the ninth month in succession last week. Economy Minister Wolfgang Clement last week confirmed a growth forecast for this year of 1.5 to two percent and said that Germany had turned the corner after a slight contraction in 2003. Still, January's survey showed that companies again shed workers, as they have every month since May 2001. "Streamlining has long been reported as a key objective of manufacturing firms, in the face of strong pressure on margins," Williamson said. "Nevertheless, the staff cuts have become far less widespread over the past eight months, partly reflecting the recent build-up of backlogs," he added.//