Eurozone manufacturing records strongest growth in over two-and-a-half years

Monday, Jan 06, 2014
Final Eurozone Manufacturing PMI at 52.7 in December The recovery in the eurozone manufacturing sector accelerated further at the end of 2013. The seasonally adjusted Markit Eurozone Manufacturing PMI rose for the third month running to post 52.7 in December, up from 51.6 in November (and unchanged from the earlier flash estimate). The headline PMI has now signalled expansion throughout the second half of the year. For the final quarter as a whole, the sector is recording its best performance in two-and-a-half years, consistent with a quarterly pace of output growth of around 0.6%. The latest improvement in overall operating conditions was underpinned by solid and accelerated growth in the Netherlands, Germany, Ireland and Italy, while Austria continued to expand at a robust clip despite the rate of increase easing slightly since November. Meanwhile the Spanish PMI moved back into expansion territory. There was even relatively positive news from Greece, where higher levels of output and new orders elevated its PMI to a 52-month high and close to the 50.0 stabilisation point. France moved in the opposite direction, however, with its PMI falling to a seven-month low and signalling contraction for the twenty-second successive month. Eurozone manufacturers reported further solid gains in both new orders and production, with the rates of expansion in December the steepest in over two-and-a-half years. Moreover, average rates of growth for both demand and output during the final quarter were higher than in the previous quarter. The latest increase in new order inflows was underpinned by a solid improvement in new export business. New export orders rose for the sixth month running, and at a pace close to November’s two-and-a-half year peak. Among the nations covered, only France and Greece reported lower levels of incoming new export business. With output, new orders and backlogs all rising, manufacturers held off from further job losses in December. The level of employment in the eurozone manufacturing sector was broadly unchanged over the month, with job creation seen in Germany, Italy and Ireland. Workforces declined at slower rates in Spain and Greece, but at faster paces in France and Austria. A further by-product of higher demand and improving confidence at manufacturers was the strongest increase in purchasing activity since May 2011. December saw average input prices rise for the fourth month running and to the greatest extent since October 2012. However, the rate of inflation remained subdued compared with the historical standards of the survey. Part of the increase in input costs was passed on to clients, as selling prices also rose for the fourth straight month. Moreover, charge inflation hit a 21- month high. Output prices rose in Germany, Italy, Spain, the Netherlands and Ireland, and were broadly unchanged in France and Austria. Only Greece reported a decrease in output charges, although the rate of decline eased further to the weakest since September 2011. Countries ranked by Manufacturing PMI in December Netherlands 57.0 32- month high Germany 54.3 - 30-month high Austria 54.1 2- month low Ireland 53.5 2- month high Italy 53.3 32- month high Spain 50.8 2- month high Greece 49.6 52- month high France 47.0 - month low Chris Williamson, Chief Economist at Markit said: “A strengthening upturn in the manufacturing sector is helping the euro area recovery become firmly established. The latest numbers are consistent with production growing at a quarterly rate of approximately 1% at the end of the year. It’s also encouraging to see prices rising slightly, suggesting firms are seeing some improvement in pricing power. “With producers reporting further growth of new orders, exports and backlogs of work, the stage is set for a good start to 2014, during which it seems likely that the manufacturing sector will help drive a meaningful, albeit still modest, recovery in the wider economy. “France, however, remains a concern. While Germany, Italy and Spain are seeing the strongest output growth since early-2011, buoyed to varying degrees by improved export sales, France is seeing a steepening downturn, in part the result of widening export losses. This suggests that competitiveness is a key issue which the French manufacturing sector needs to address to catch up with its peers.”