Global factory output expands, euro zone up first time in 17 months

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London, Beijing: Factory activity in the euro zone expanded for the first time in 17 months in October and also picked up in Britain and China, suggesting global economic recovery is underway, surveys showed on Monday.

The upbeat data comes ahead of policy meetings of the Federal Reserve, European Central Bank and Bank of England this week with policymakers facing a mass of conflicting signals.

The 16-nation euro zone saw its manufacturing sector expanding at its fastest rate since April 2008 while in the UK the sector grew at its fastest pace in two years. Parallel figures due later on Monday are expected to show the United States' manufacturing sector also continued to grow last month.

The Fed, ECB and BoE have all slashed interest rates to historic lows and pumped liquidity into their economies in a bid to temper recession.

Economists have begin to turn their attention to the central banks' exit strategies but while the euro zone economy is seen growing again in the third quarter Britain's contracted unexpectedly, despite a raft of upbeat data, including the PMIs. Presenting the same problem from the opposite direction, US GDP figures last week were stronger than forecast but other economic evidence from there has been decidedly patchy. I think the story is there are major survey data problems and quite how policymakers make sense of this I don't know, said Ross Walker at RBS.

Markit's Eurozone Purchasing Managers Index jumped to 50.7 in October from 49.3 in September, but there was divergence among its big four nations with Germany and France growing while Spain and Italy continued to see weakness. A reading above 50 means business activity expanded.

Monday’s data suggest that the recovery in the euro area is starting to gather pace ... (but) we remain cautious about the economic outlook in the months ahead, said Colin Ellis at Daiwa Securities. In the UK the CIPS/Markit PMI leapt to 53.7, smashing expectations for 50.0 and way above even the highest forecast from 30 analysts for 51.0. The figures suggest Britain's economy made a strong start to the final quarter of this year, having suffered its longest recession on record.

The Bank of England will decide on Thursday whether to increase its £175 billion quantitative easing programme which is pumping new money into the economy.