The growth rate of the Eurozone manufacturing sector remained lacklustre in February. At 51.0, the final seasonally adjusted Eurozone Manufacturing PMI (purchasing managers' index) was unchanged from January’s six-month high and below the earlier flash estimate of 51.1.
The rate of expansion in manufacturing production was also the same as in the prior month, despite a slight uptick in growth of new order inflows to a seven-month high. However, the rate of increase in total new business remained only moderate, as subdued domestic market conditions offset accelerated growth in new export orders*.
Manufacturing employment edged higher for the sixth straight month in February, with the rate of jobs growth the best during that sequence. Subsequently, backlogs of work were broadly unchanged over the month.
Price pressures remained on the downside during February. Lower oil prices continued to filter through to costs, leading average purchase prices to decline sharply again. Indeed, the rate of deflation in average input costs was only moderately less steep than January’s five-and-a-half-year record. Meanwhile, average selling prices decreased for the sixth straight month, mainly due to lower costs, subdued market conditions and rising competition.
Markit said that by nation, Ireland and Spain remained the strongest performers. The Irish PMI rose to its highest in over 15 years, underpinned by accelerated growth of both new orders and production and the joint-fastest rate of job creation in the series history (matched only by May 1998 when the survey was first conducted).
Output growth in Spain slowed slightly over the month but, with new order inflows improving, companies were still encouraged to raise employment for the fourteenth straight month.
The other nations to signal improved manufacturing performances in February were Italy, Germany and the Netherlands.
All three countries reported modest growth of production. Rates of output expansion slowed in Germany and the Netherlands, although Germany registered a slight acceleration in new order growth. Output rose at the fastest pace for eight months in Italy, as new order inflows returned to growth principally led by a strong export performance.
Manufacturing employment rose only marginally in Germany and fell in the Netherlands, but grew in Italy at the quickest pace since last April.
PMI readings for France, Greece and Austria all signalled contractions in February, with France sinking back to the bottom of the Eurozone PMI ranking table. These nations also reported concurrent declines in production and new orders, leading to further job losses in France and Austria.
The news on the employment front was slightly better for Greece, with workforce numbers rising for the third successive month.
*Including intra-Eurozone trade.
Chris Williamson, chief economist at Markit commented: "The Eurozone manufacturing sector barely expanded in February, highlighting the malaise that still hangs over the region’s goods-producing economy as a whole. However, beneath the disappointing headline figure, different parts of the manufacturing economy are clearly moving at very different speeds, ranging from a Celtic boom to a Gallic slump.
"Coming months will hopefully see all countries’ manufacturing sectors pick up speed, as business and consumer confidence is buoyed by ECB stimulus. The recent fall in the euro should also provide a noticeable stimulant to export sales.
"Way out in the fast lane is Ireland, where the strongest growth in 15 years is generating near-record job creation and suggests the economy continues to boom. Spain is also enjoying impressive export-led manufacturing gains, boding well for another quarter of robust economic growth in the first quarter.
"Germany, the Netherlands and Italy are meanwhile only managing to eke out mediocre rates of expansion, though in the case of Italy it is encouraging to see that growth is at least picking up, fuelled by rising exports. The sluggishness of manufacturing in Germany remains a particular concern.
"France, Greece and Austria are the slow lane stragglers, with all three seeing their manufacturing economies contract again February. France is the most worrying, not just because it trails behind all other countries, but it is also the only country seeing a steepening downturn."
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