There has been a road-based slowdown in Eurozone manufacturing in June as
growth hit an 18-month low. Contractions have been seen in Italy, Spain, Ireland
The final Markit
Eurozone Manufacturing PMI (Purchasing Managers' Index) fell to a
one-and-a-half year low of 52.0 in June, down from 54.6 in May and unchanged
from the earlier flash estimate. At 54.9, the average PMI reading during Q2 2011
is the lowest since the opening quarter of 2010 and well below the average of
57.9 seen in Q1. The PMI has signalled expansion in each of the past 21 months.
Broad-based slowdown saw Italy
and Ireland join Spain and Greece in contraction territory
Headline PMIs fell in almost all of the nations for which data
are collected in June. The sole exception was Greece which, nevertheless, still
recorded the steepest rate of contraction of all countries. Italy, Spain and
Ireland also saw sub-50 PMI readings, signalling deteriorating business
conditions. That said, Markit observed that only very marginal
declines were recorded in Italy and Ireland.
Ongoing growth was seen in Germany, France, Austria and the
Netherlands. However, the rates of expansion were among the weakest since the
recoveries began in these countries.
Growth of output at 21-month low,
as new orders suffer modest decline
June saw manufacturing production increase at the slowest pace
since September 2009. The rate of expansion was below the long-run survey
average, but slightly above the earlier flash estimate. Output rose at slower
rates in Germany, France, Italy, Austria and the Netherlands, while contractions
were seen in Spain, Ireland and Greece.
The slowdown in output growth mainly reflected a slight drop in
the volume of incoming new orders, which fell for the first time since July
2009. Weakening domestic markets – especially at the periphery – was a major
factor underlying lower order book inflows.
June saw new export orders increase at the slowest pace since
September 2009, led down by a decrease at intermediate goods producers. Export
orders rose in almost all of the nations covered (the exception being Austria),
but only Greece saw a faster rate of increase.
Production continued to rise at a robust pace in the investment
goods sector in June, but lower output was seen at consumer and intermediate
goods producers. Meanwhile, new order inflows stagnated at consumer and
investment goods companies, and dropped at the steepest rate in over two years
at intermediate goods producers.
Jobs growth led by Austria and Germany
Eurozone manufacturers’ backlogs of work
declined for the first time in 20 months and the rate of depletion in finished
goods inventories was the quickest since March, in both cases reflecting
disappointing sales. Firms scaled back their recruitment as a result, with the
rate of payroll growth hitting an eight-month low (and below the earlier flash
estimate). Employment nonetheless continued to grow at an above-average pace for
Jobs growth was led by Austria and Germany,
with solid increases also seen in France and the Netherlands. In contrast,
Greece, Ireland and Spain all reported further job losses, while Italy saw
headcounts fall for the first time since last November.
Input price inflation lowest for ten months
Lower oil and commodity prices led to a further marked easing in
the rate of increase in average input prices. Purchasing managers reported that
input prices rose at the slowest pace since August 2010, down sharply from
February’s record high and below the earlier flash estimate. Rates of inflation
slowed in all of the nations covered by the survey, with the sharpest easing
seen in France, Austria and Spain.
Weaker cost pressures also partly reflected a
further easing in the incidence of supply-chain disruptions in June. Although
average vendor performance continued to deteriorate sharply, the extent of the
lengthening in lead times was the least marked in almost a year-and-a-half.
Companies continued to hike their selling
prices, however. Average output prices rose for the fifteenth successive month,
led by marked increases in Germany, the Netherlands and France. Germany was
notable in being the only nation to see an increase in the rate of output price
inflation, while only Greece reported a reduction in average selling prices. The
overall rate of charge inflation across the region was the slowest in six
Chris Williamson, Chief Economist at Markit
said: "Eurozone manufacturers,
who had provided the driving momentum behind the region’s recovery over the past
two years, reported much slower growth in June. Over the past two months, output
growth has weakened to the greatest extent since late-2008. This reflects a
combination of lacklustre domestic demand in many countries, especially the
austerity-hit periphery, as well as a near-stagnation of export sales.
"Increasing numbers of countries are showing
signs of sliding back into recession, with deteriorating business conditions now
reported in Italy, Spain, Ireland and Greece. Even manufacturers in Germany and
France saw growth of new orders slip closer to stagnation.
"The brighter news was to be found in the
inflation numbers. Although companies continued to hike prices in response to
rising costs, the rate of input price inflation slowed to the weakest since
August 2010 due to lower prices for oil and other commodities."
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