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Eurozone manufacturing recovery slows slightly

03 March, 2014

Manufacturing in the Eurozone region experienced a slight slowdown in its rate of expansion during February, from January’s 32-month high, but continued to recover for the eighth successive month. The latest Markit PMI (Purchasing Managers’ Index) for manufacturing in the Eurozone, reports an expansion in six of the seven nations in which data is collected (the Greek PMI is released later).

The Netherlands rose back to the top of the PMI league table and, along with Ireland and Spain, was one of three nations to record a faster rate of expansion than in January. Germany and Austria remained among the strongest performers, despite rates of improvement easing slightly. Italy also continued to recover, despite its PMI dipping to a three-month low. Although France stayed at the foot of the table, its PMI rose to a five-month high. 

Manufacturing output, new orders and new export business all rose across the Eurozone for the eighth successive month. France was the only nation among the seven covered in the survey to experience a drop in new orders.

“The dip in the manufacturing PMI – its first fall for five months – is a disappointment and a reminder of the hesitant nature of the region’s nascent recovery,” comments Markit’s chief economist, Chris Williamson. “However, we should not lose sight of the fact that this is the second-strongest reading that the Eurozone has seen for almost three years.

“Despite the February fall, the survey remains consistent with industrial production growing at a robust quarterly rate of 1% in the first quarter, meaning manufacturing is on course to provide a substantial boost to the overall economy,” Williamson adds. “Gross domestic product looks set to rise by 0.4–0.5% in the first three months of the year, assuming the recovery does not lose further momentum in March.

The Eurozone manufacturing PMI (50 = no change)
Source: Markit

“With new orders and backlogs of work still rising at reasonable rates, further on-going expansion is signalled for coming months. Employment has now also risen for two consecutive months, as firms seek to boost capacity in the face of the brightening outlook. Job growth is still very weak though, and manufacturing will not help bring about any rapid falls in the region’s near-record unemployment rate any time soon.

“Policymakers will nonetheless be reassured that the trends in manufacturing output and employment are moving in the right direction, and that the recovery is broadening out,” Williamson comments. “February was the first time for almost three years that output rose in all four of the largest Euro nations, as France eked out a welcome return to expansion alongside surging growth in Germany, and strong increases in Spain and Italy.”

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