Feb. 1 (Bloomberg) -- European manufacturing growth was stronger than initially estimated in January, accelerating to the fastest pace in nine months on stronger output in Germany. A gauge of manufacturing in the euro region rose to 57.3 from 57.1 in December, London-based Markit Economics said in an e-mailed report today. That’s the highest since April and above the initially reported 56.9. A reading above 50 indicates growth. In Germany, output growth slowed less than initially estimated, with a gauge at 60.5, down from 60.7. European manufacturers have helped bolster the region’s economic expansion as export growth countered the impact of austerity measures on consumer demand. Alstom SA, the world’s third-largest power-equipment maker, said on Jan. 20 that order growth may accelerate, helped by emerging markets. German unemployment dropped to an 18-year low in January. “Euro-region manufacturers continue to enjoy a marked recovery,” said Thilo Heidrich, an economist at Deutsche Postbank in Bonn, Germany. “All indicators are on a comfortable growth level and suggest a further acceleration in output. The euro was higher against the dollar after the data, trading at $1.3773 at 10:15 a.m. in London, up 0.6 percent on the day. It has shed 1.1 percent over the past three months. ‘Important Driver’ A gauge of services advanced to 55.2 in January from 54.2 in December, Markit said in an estimate on Jan. 24. A composite index of manufacturing and services rose to 56.3 from 55.5. Markit is scheduled to release the final figures on Feb. 3. A sub-indicator of new orders remained at the highest in eight months, today’s report showed. “Manufacturing continued to act as an important driver of economic growth at the start of 2011,” Markit Chief Economist Chris Williamson said in the statement today. “Growth is also generating jobs.” European economic confidence remained near the highest in more than three years in January and industrial orders increased more than economists forecast in November. In Germany, Europe’s largest economy, business confidence jumped to a record last month and the number of people out of work dropped a seasonally adjusted 13,000 to 3.135 million in January. French and Italian executives also grew more optimistic. IMF Forecasts Infineon Technologies AG, Europe’s second-largest chipmaker, today raised its full-year forecast after reporting better-than-expected first-quarter profit. Chief Executive Officer Peter Bauer said the company “continued with the excellent performance” in the fiscal first quarter. European companies have relied on faster-growing markets to boost sales as governments from Spain to Ireland stepped up spending cuts to lower budget deficits. The International Monetary Fund said on Jan. 25 that the world economy may expand 4.4 percent this year with the euro region growing 1.5 percent and the U.S. 2.5 percent. In “many emerging economies, activity remains buoyant,” the Washington-based IMF said. U.K. manufacturing growth also accelerated in January, Markit said today. In China, manufacturing expanded and input costs climbed, two reports showed today, while U.S. consumer spending rose more than forecast in December, Commerce Department figures showed yesterday. ‘Inflation Worries’ Siemens AG, Europe’s largest engineering company, said on Jan. 25 that fiscal first-quarter profit more than analysts estimated. Alstom said last month that orders jumped 30 percent in the fiscal first quarter on emerging markets. Today’s report also suggests that companies are gaining more room to pass on higher commodity costs. Input-price inflation accelerated in all countries covered by the survey, reaching records in Germany, Italy, Spain and Austria, Markit said. Williamson said that “inflation worries will be stoked by a record rise in manufacturers’ raw-material prices.” While euro-area inflation accelerated more than economists forecast in January, European Central Bank President Jean-Claude Trichet said in an interview on Jan. 26 that the benchmark interest rate remains “appropriate” at 1 percent. Austria’s Ewald Nowotny said he doesn’t expect the central bank to raise borrowing costs in the first half of 2011. “Since the start of the recovery in the euro area, the third quarter of 2009, we have quarter after quarter, been positively surprised,” Trichet said in the interview at the WEF. Still, the ECB remains “prudent and cautious.” Euro-area unemployment remained near the highest in more than 12 years in December as the fiscal crisis prompted companies to keep hiring plans on hold. The seasonally adjusted jobless rate held at 10 percent, the same as in November, data showed today. “The growth outlook is still uncertain given the significant fiscal tightening in the pipeline,” said Nick Kounis, head of macroeconomic research at ABN Amro in Amsterdam. “Although we don’t expect imminent rate hikes, we do continue to expect rates to go up in the second half of the year.” --With assistance from Kristian Siedenburg in Budapest and Francine Lacqua in London. Editors: Fergal O’Brien, Jones Hayden To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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