European economy shines as US, Japan fades

Economic growth in Western Europe is accelerating further, according to reports from manufacturing firms today.

This trend leaves Europe out of step with the United States and Japan, where there are increasing signs of a slowdown.

The European Central Bank (ECB) met as monthly surveys of company purchasing managers compounded a picture of economic expansion at a pace which the ECB says could fuel too much inflation if not kept in check by higher interest rates in the euro zone.

Besides the manufacturing surveys, or PMI indices, Germany followed on France's heels with news of another notable slide in unemployment, evidence that the spurt in economic growth this year is seeping through to labour markets.

Germany's Labour Office said the number of unemployed people fell a seasonally adjusted 67,000 in October, more than three times as much as economists had predicted.

The unadjusted jobless rate fell below the 10-per cent mark for the first time in four years, to 9.8 per cent.

In France, there was a dip in the jobless rate to 8.8 per cent in September, from 9 per cent in August, and the government predicted more significant reductions in the year ahead.

The first and second largest economies of the euro zone have been blackspots for unemployment for many years and still have jobless rates above the European average, however.

The laggard of the world economy for years, Europe outstripped the US and Japan during the second quarter of 2006 with growth of an annualised 3.6 per cent, and the latest readout from manufacturers showed the new role continuing.

The RBS/NTC Eurozone Purchasing Managers' Index for the euro area rose to 57, higher than the 56.7 expected, from 56.6 in September. Output and new orders hit their highest levels in three months, though short of peaks in June.