Reuters reported that factory input costs leapt across the globe in February, the latest sign of rising inflationary pressures, while euro zone manufacturing grew at its fastest in nearly 10 years.
British manufacturing also grew strongly, at its fastest pace in nearly two decades, and Indian factory growth accelerated. But in China, where the authorities have raised rates and bank reserve requirements multiple times since 2010, factory growth slipped to its slowest pace in six months.
Overall, the February purchasing managers' indexes provide the latest evidence of growing inflationary pressure from a sharp rise in commodity prices. Crude oil prices hit 2 and a half year highs last week on supply concerns after uprisings in Libya.
Mr Martin van Vliet at ING said that "With the latest surge in commodity prices yet to fully feed through into consumer prices, inflation could well climb further in the next few months."
The output price index in the 17 nation euro zone hit a record high for the survey, which was conducted February 11th t February 21st 2011 before oil prices spiked again last week.
Mr Dominique Strauss Kahn the head of the International Monetary Fund warned that global economic growth could suffer if the rise in oil prices, now well above USD 100 a barrel, were sustained for a long period.
Official euro zone data also showed consumer prices rose 2.4% YoY in February 2011, considerably above the European Central Bank's target of just below 2%.
The European Commission upped its inflation forecasts for the bloc, now expecting prices to rise 2.2% in 2011 as compared to their previous 1.8% forecast.
The ECB is not expected to exit from the ultra-loose monetary policy it adopted in the depths of the financial crisis when it meets on Thursday but economists expect an interest rate hike by the fourth quarter of this year.
Mr Jonathan Loynes chief European economist at Capital Economics said that "February's flash euro zone CPI figures will do little to alter the ECB's recent rather more hawkish stance ahead of Thursday's Council meeting and press conference."
The latest European PMIs also showed that manufacturing growth across the euro zone, which had previously been mainly driven by Germany's robust economic recovery, picked up in some economies on the periphery. In debt stricken Ireland, manufacturing activity hit an 11 year high.
A comparable survey for the U.S. from the Institute for Supply Management, due at 1500 GMT, is expected to show a slight rise to 61.0 from 60.8, indicating a strong rate of growth.
But Federal Reserve chairman Mr Ben Bernanke is expected to say in Congressional testimony later that the recent rise in oil prices poses a risk to economic recovery.
( Source: www.steelguru.com )