Manufacturing activity in the eurozone grew more rapidly during May, driven by pickups in Spain and Italy, according to surveys of purchasing managers.
The surveys indicated that the weaker euro has helped manufacturers win new export orders, while also raising costs for manufacturers by lifting import prices, although businesses didn't raise the prices they charged, an indication that the European Central Bank faces a long struggle to raise the currency area's inflation rate back to its target of just under 2.0%.
Data firm Markit, which surveys more than 3,000 manufacturers across the eurozone, said on Monday that its purchasing managers index rose to 52.2 in May from 52.0 in April. Markit had previously estimated the PMI rose to 52.3. A reading below 50.0 indicates activity is declining, while a reading above that level indicates an increase.
Spain and Italy recorded significant pickups as they continued to emerge from long periods of economic decline or stagnation. The former saw activity rise at the fastest pace in 97 months, and the latter 49 months. In both countries, the weaker euro seems to be aiding exporters.
"Spain and Italy appear to be staging strong recoveries, benefiting in particular from impressive export performances," said Chris Williamson, Markit's chief economist. "Such export gains point to improved competitiveness which bodes well for longer-term economic prospects."
However, there was weakness at the eurozone's core. French manufacturing activity declined again, although at the slowest pace in a year, while German activity rose at the slowest pace in three months.
The ECB launched a program of quantitative easing on March 9 to buy more than €1 trillion ($ 1.07 trillion) of bonds using newly created money by September 2016. Its main goal is to lift the inflation rate to just under 2%.
One effect of the new program has been to weaken the euro against the U.S. dollar and other major currencies.
Until recently, there have been few signs the weaker euro was boosting output in the currency area. But the survey of purchasing managers recorded the strongest rise in new export orders in over a year.
The rise in new orders has given manufacturers fresh confidence to hire additional workers, which they did for the ninth straight month.
The ECB hopes the weaker euro will boost inflation by raising prices of imported goods and services. There were some signs that is beginning to happen, with purchasing managers reporting that the costs their businesses face rose for the third straight month, and at the fastest pace since April 2012. However, businesses didn't respond by raising their own prices, instead leaving them unchanged.
Write to Paul Hannon at paul.hannon@wsj.com
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