|The Flash Eurozone Composite Output Index, March 2011 Source: Markit|
At 57.5 in March, the Markit
Final Eurozone Manufacturing PMI
was below February’s ten-and-a-half year peak of 59.0 and marginally down on the
earlier flash estimate of 57.7. Nevertheless, the latest reading was still
amongst the highest seen in the survey’s 14-year history.
Manufacturing output, new orders and new export
orders all expanded for the
twentieth consecutive month in March. Despite easing since February in all three
cases, rates of expansion remained well above long-run survey averages.
The strongest PMI readings were seen in
Austria, Germany and the Netherlands. However, all but one country saw a lower
PMI reading compared to February. Although the Greek PMI climbed to its highest
level since January 2010, it remained the only country to see an ongoing
contraction of the manufacturing sector.
Production growth was strongest in the
investment and intermediate goods sectors, while consumer goods remained a drag
on the pace of expansion.
remained close to last month’s ten-and-a-half year high, led by a record
increase in Germany and a further marked gain in Austria. Only Spain and Greece
saw employment fall during the month, further highlighting the divergence
between business conditions in the core and the periphery.
These divergences were also highlighted by
data on backlogs of work. Despite higher employment, backlogs increased markedly
in Germany and Austria, while modest gains were seen in France, Italy and the
Netherlands. However, levels of outstanding work fell in Spain, Ireland and
Greece, pointing to the existence of spare capacity.
Markit said price pressures remained elevated
in March. Average input prices increased at a rate close to February’s
survey record (though below that signalled by the earlier flash estimate). There
were widespread reports of higher food, energy, fuel, metals, oil and other
commodity prices. The steepest increases were seen in France, the Netherlands
and Germany. However, only Ireland and Greece saw increased rates of inflation
compared to February, the former seeing a particularly steep jump.
Part of the latest rise in input prices
reflected supply-chain disruption and raw material shortages (though, so far at
least, these were not directly attributed to the crisis in Japan), as
highlighted by another near-record lengthening of supplier lead times.
With companies striving to pass higher costs
onto customers, factory gate prices
rose to the greatest extent since
charges data were first collected in November 2002. Record or joint-record
increases were seen in France, Spain, the Netherlands, Ireland, Austria and
Germany, and also close to an all-time high in Italy. Only Greece saw a decline.
Chris Williamson, Chief Economist at
Markit said: "The Eurozone’s manufacturers continued to report
buoyant business conditions in March. Despite the slight easing since February,
the data are consistent with industrial production growing at a quarterly rate
of 2%, spearheading the region’s recovery.
"National divergences are marked, however, with surging output
growth driving record job creation in Germany, while weak or falling production
led to ongoing job losses in Spain and Greece.
"The record jump in average prices charged for goods will
further encourage the European Central Bank to increase interest rates sooner,
rather than later, which may drive further divergences among member states as
higher borrowing costs hit already weak demand in the periphery."
The Eurozone Manufacturing PMI (Purchasing Managers' Index) is
produced by Markit and is based on original survey data collected from a
representative panel of around 3,000 manufacturing firms. National data are
included for Germany, France, Italy, Spain, the Netherlands, Austria, the
Republic of Ireland and Greece. These countries together account for an
estimated 90% of Eurozone manufacturing activity.