Euro Area manufacturing weak in October despite ECB's stimulus
The growth rate of the Euro Area manufacturing sector ticked higher in October, as the final PMI (purchasing managers' index) data for output, new orders and employment all came in stronger than the earlier flash estimates. However, the sector remained weak despite the ECB's stimulus measures.
At 52.3 in October, the final seasonally adjusted Euro Area Manufacturing PMI edged higher from September’s five-month low and the earlier flash reading (both 52.0). However, the rate of expansion signalled at the start of quarter four was still in line with the third quarter’s tepid growth outcome. The improvement in the headline index between its flash and final estimates was largely centred on Germany, where the PMI rose by 0.5 points since its first publication through stronger trends in the output (+0.5) and new orders (+1.1) components.
Headline PMI indices were above the critical no-change mark of 50.0 in all nations except Greece, with faster growth signalled for Italy, Austria and the Netherlands. The Greek PMI continued to move higher nonetheless, reaching a five-month high. Euro Area manufacturing production expanded for the twenty-eighth month running in October.
Output growth ticked higher during the latest survey month, underpinned by a slightly sharper increase in new orders. Intakes of new export business* also rose at a moderately faster pace, the quickest since June.
The strongest rates of output growth were signalled in the Netherlands, Italy and Austria, which were also the only nations to report faster rates of expansion than September. Germany and Ireland also reported relatively solid expansions of output, whereas as growth was comparatively modest in France and Spain.
All of these nations also reported increased intakes of total new business and new export orders. For most this represented a continuation of an expanding trend, except France which saw an improvement in total new work received for the first time since April 2014 and growth of new export business for the first time in five months.
Although Greece remained in a severe downturn, its rates of contraction in production, new orders and new export business have all eased substantially since the survey-record declines registered in July.
Euro area manufacturing employment rose again in October, extending the current sequence of gains to 14 months. However, the rate of jobs growth remained weak and slipped to the weakest since February. Higher employee headcounts were reported in Germany, Italy, Spain, the Netherlands, Austria and Ireland, although only Italy, the Netherlands and Austria saw faster increases.
Chris Williamson, chief economist at Markit said: “The Euro Area manufacturing recovery remains disappointingly insipid. The October survey is signalling factory output growth of only 2% per annum, a lacklustre performance given the amount of central bank stimulus in place. “With factory production lacking vigour, employment growth sagging to an eight-month low and output prices falling at the fastest rate since February, it’s easy to see why the ECB are considering additional stimulus.