Further evidence of a pick-up in the euro zone's manufacturing base emerged this morning with the news that a closely-watched indicator of activity rose to its highest level in 16 months. The euro zone manufacturing sector purchasing managers' index rose to a seasonally adjusted 53.6 in December from an unrevised 52.8 in November, sources said. Analysts had pencilled in a more modest rise in the index to 53.4. This is the highest level in the index since August 2004 and is likely to cement expectations that the European Central Bank will continue to raise interest rates this year. In early December, the central bank raised its key refi rate a quarter point to 2.25 pct, its first hike in over five years. A reading above 50 indicates that the manufacturing sector is generally expanding, while a reading below 50 suggests that it is generally contracting. Today's survey means that the sector has expanded for the sixth consecutive month. A more detailed look at the survey shows that the new orders sub-index rose to 56.0 in December from 54.4 in November, while the output component increased to 55.8 from 54.8. Both were the highest since July 2004. There was even better news on the jobs front, with the employment sub-index rising to 50.3 from 49.9. That was the first time since May 2001 that the employment index has risen above 50, which points to jobs creation. Elsewhere, the input prices sub-index slipped to 62.2 from 62.6, while output prices were unchanged at 51.4.