The final Markit Eurozone Manufacturing PMI
(Purchasing Managers' Index) fell sharply to a
7-month low of 54.6 in May, down from 58.0 in April and below the flash
estimate of 54.8. The fall in the index was the largest since November 2008, as
manufacturers reported slower rates of increase in output, new orders,
employment and inventory accumulation.
‘Lop-sided’ recovery continues:
National PMIs signalled a broad-based slowdown in the pace of recovery, with
headline indices retreating from their April levels in all of the countries
covered. Growth remained heavily centred on Germany, France, Austria and the
Netherlands. Germany continued to record by far the greatest rate of expansion,
despite also seeing the sharpest growth slowdown. Conditions meanwhile remained
much more subdued in the periphery, with the rate of decline
intensifying in Greece, Spain slipping back into contraction and steep slowdowns
recorded in Italy and Ireland.
Slower output and new orders
growth: Rates of expansion in manufacturing production and new orders eased
to seven and eight-month lows respectively in May, and were also below the
earlier flash estimates. Backlogs of work meanwhile posted the smallest rise for
eight months, while stocks of finished goods showed their weakest decline in a
year – often linked to disappointing sales and highlighting the recent
deterioration in growth of demand.
Suppliers’ delivery times lengthened in May, but the incidence
of delays fell to an eight-month low.
Higher output was signalled in the capital, consumer and
intermediate goods sectors, although rates of increase eased in all three cases.
The sharpest slowdown was seen at consumer goods producers, where new orders
growth slowed to near stagnation.
New export orders rose at the weakest pace since last September.
Rates of expansion eased in all of the nations covered except Greece, which saw
a slight increase following eight months of contraction.
Solid job creation centred on Germany, Austria and the
Netherlands: Manufacturing employment rose for the thirteenth month running
in May. Growth in payroll numbers eased to its weakest since January, but was
still well above the long-run survey average and quicker than that signalled by
the earlier flash estimate.
The strongest jobs growth was seen in Germany, followed by
Austria and the Netherlands – despite the rates of increase easing in all three
cases. France and Italy saw more modest rises by comparison, although Italy was
the only nation to buck the slowing trend. Manufacturing employment in Ireland
was largely unchanged from April, while Greece and Spain both reported further
marked job losses at goods producers.
Inflationary pressure slows on back of recent falls in oil and
commodity prices: Input cost inflation slowed sharply to a six-month low in
May, with the extent of the easing the steepest since late-2008. This mainly
reflected falls in the cost of oil and other commodities. The sharpest slowing
in raw material price inflation was seen in the Netherlands, Italy and Germany.
Weaker growth of input prices filtered
through to manufacturers’ selling prices in May. Prices at the factory gate
continued to rise at an historically marked pace, but it was the least marked
since January. Output price inflation eased across all of the nations covered,
with Greece posting an outright fall in charges.
Chris Williamson, Chief Economist at Markit
said: "Eurozone manufacturing
growth slowed sharply in May, with deteriorating performance broad-based across
all countries surveyed. The worsening growth in the periphery is particularly
worrying, suggesting these countries will face increasing difficulties in
reducing their deficits. May saw Spanish manufacturing slide back into
contraction, alongside a faster rate of decline in Greece and disappointingly
weak expansions in both Italy
"The brighter news was that recent falls in
commodity prices helped drive the greatest easing in input cost inflation since
"The combination of weaker inflationary
pressures and the steep easing in the pace of growth may encourage policymakers
to hold off on interest rate hikes until a clearer picture of the health of the
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.