Europe’s manufacturing activity — previously a weak point on the region’s path to recovery — has increased dramatically, supported by rising orders for everything from new aircraft to highly sophisticated technology components. In fact, many euro-zone factories have reported labor shortages amid the surging demand. Factory activity has expanded in all major European nations, led by manufacturing powerhouse Germany and the neighboring Netherlands.
Despite these encouraging signs, however, the European economy continues to struggle with deflationary pressures. Core inflation, excluding volatile food and energy prices, fell to 0.9% in October, its lowest level since March and far below the European Central Bank’s 2% target. This persistently weak trend prompted the ECB to extend its massive bond-buying stimulus program through September 2018 in an attempt to boost lending and support further economic growth.