May data signalled a modest acceleration in the rate of expansion of the Eurozone manufacturing sector. The final seasonally adjusted Eurozone Manufacturing PMI (purchasing managers' index) posted 52.2, matching March’s ten-month high but coming in just below the earlier flash estimate of 52.3.
Manufacturing production expanded again in May, extending the current sequence of growth to 23 months. Although the rate of increase ticked lower, it was still among the fastest seen over the past year. The trends in both total new orders and new export* business both improved, suggesting output growth should be sustained in the coming months.
New business and new export orders both rose at the fastest rates in just over a year. The improved level of demand encouraged firms to take on additional staff, leading employment to rise for the ninth month running. Part of the increase in jobs reflected rising levels of outstanding business.
National data for Ireland and Greece are published on 2nd June. Of the remaining countries for which data were available, Spain, the Netherlands and Italy were the leading lights. Germany and Austria saw modest expansions and France a further contraction.
Output and new orders in Spain rose at the quickest pace since 2007, underpinned by the strongest gain in new export business for 15 years. Production and new order growth in Italy was the fastest in over four years, while accelerations were also signalled for the Netherlands. All three of these nations registered solid job creation.
Output growth in Germany slowed sharply to a five-month low in May. The rates of increase in both total new business and new export orders also remained muted, in turn slowing the pace of job creation. Austria saw a modest acceleration in output growth, despite a slight decrease in new orders, and further headcount reductions.
The downturn in production at French manufacturers was extended to 12 months in May. New orders and employment also both fell, but there was a mild pick up in new export orders received. Cost pressures remained on the upside in May, as input prices rose for the third month running and to the greatest extent since April 2012. The euro exchange rate and recent oil price increases both contributed to the latest rise in costs.
Input price inflation was recorded in all of the nations except Austria, with accelerations signalled in each of the ‘big-five’ countries (Germany, Italy, France, Spain and the Netherlands). Meanwhile, average output charges were unchanged since April. Increases were signalled in Germany, Italy and Spain, while French, Dutch and Austrian manufacturers all reduced their average selling prices.
*Including intra-Eurozone trade. Chris Williamson, chief economist at Markit said: “The final PMI data came in slightly below the earlier flash estimate but nevertheless signalled that euro area manufacturers are enjoying their best spell of growth for a year. The survey data point to a quarterly rate of industrial growth of approximately 0.5%. This should help drive GDP higher in the second quarter, perhaps matching the 0.4% rise seen in the first three months of the year.
“The rate of growth is modest rather than spectacular, however, and there are clearly countries which continue to struggle. Weakness is centred in the region’s core, with France’s manufacturing sector still in decline and Germany only seeing very meagre growth.
“On the other hand, Spain and Italy appear to be staging strong recoveries, benefitting in particular from impressive export performances. Such export gains point to improved competitiveness which bodes well for longer-term economic prospects. Manufacturers in France and Germany need to be mindful of such competition.”
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