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The Eurozone manufacturing recovery
lost further momentum in July and moved closer to stagnation. The final Markit
Eurozone Manufacturing PMI fell to 50.4, below June’s 52.0 and the weakest
reading since the recovery began in October 2009. The level of the headline PMI
(Purchasing Managers' Index) was in line with the earlier flash estimate.
The slowdown was broad-based, with
almost all of the national PMI indices coming in lower than their respective
June levels. Germany, France, the Netherlands and Austria all reported weaker
rates of expansion, while deteriorations in Greece and Spain gathered pace.
Although the Italian PMI moved slightly higher in July, it was only to a level
broadly consistent with stagnation.
The consumer and intermediate goods
sectors both saw operating conditions deteriorate in July. Although a further
improvement was signalled for the output growth slowed following broad-based
reduction in new order inflows.
Output growth slowed
following broad-based reduction in new order inflows:
The ongoing period of expansion in manufacturing production extended into a
twenty-fourth successive month in July. The rate of increase was the weakest
during that sequence, albeit an improvement on the modest decline signalled by
the earlier flash estimate. Growth of output slowed in Germany, France and
Italy. Austria and the Netherlands both fell into contraction territory for the
first time since June 2009, while Spain and Greece all saw production decline
further.The main factor underlying the near stagnation of production volumes was
reduced inflows of incoming new business.
Manufacturing new orders in the
Eurozone declined for the second month running, and to the greatest extent for
just over two years. Almost all of the nations covered saw a drop in new work
received, with only a marginal increase in the Netherlands bucking this trend.
The decline in total new orders
partly reflected a lower intake of new export work, as new export orders fell
for the first time in two years. The steepest reduction was in Germany, while
there were also decreases signalled in Spain, Austria and the Netherlands.
Growth of exports picked up in France and Greece, but slowed in Italy.
Employment still rising in
Germany, France, the Netherlands and Austria: Job
creation was recorded for the fifteenth consecutive month in July. The rate of
increase eased to the slowest since last October, however, and was weaker than
the earlier flash estimate. Jobs growth was recorded in Germany, France, Austria
and the Netherlands, but only Germany saw a faster rate of increase. Greece and
Spain reported further job losses, while manufacturing employment in Italy was
unchanged from one month earlier.
As well as slightly higher output,
the latest rise in Eurozone manufacturing employment reflected efforts to reduce
backlogs of work. Outstanding business subsequently fell for the second month
running, and at the fastest pace since August 2009.
Price pressures continue to
ease: On the price front, rates of inflation in input
costs and output prices eased to the weakest since January 2010 and October 2010
July’s increase in input prices was
slightly less marked than the earlier flash estimate. Companies linked slower
cost increases to recent falls in the price of commodities such as oil and
steel. All of the nations for which data are collected saw a deceleration in
average input price inflation, with the steepest easing seen in France, Italy
and the Netherlands. The highest rates of increase were again registered in
Germany and the Netherlands.
Selling price inflation slowed further from March’s series-record high to a
The trend in output charges was
closely linked to that of input costs by surveyed companies. Average selling
prices rose in all nations except Greece. However, where charge increases were
reported, the extent of the rise was substantially less marked than the
series-record highs seen earlier in the year.
Average supplier lead times
lengthened again in July, extending the current sequence of increase to two
years. However, the extent of the deterioration was the least marked since
Rob Dobson, Senior Economist at Markit said:
“The final PMI readings confirm a further drift towards stagnation for the
Eurozone manufacturing sector, a marked turnaround from the surging growth seen
at the beginning of the year. Manufacturing production scarcely rose during
July, as new orders declined for the second month running. The breadth of the
deterioration in order inflows is striking, with declines in new business seen
not only in the periphery but also in the now rapidly-cooling core nations of
France and Germany.
“Brighter news was to be found in
the numbers on employment and prices. Job creation is holding up well in the
face of weaker output growth, while input price inflation continued to slow to
provide some welcome respite for manufacturers. Although companies continued to
hike prices in response to rising costs, the extent of the increase in charges
was the weakest since last October.
“The ability of firms to continue
to raise employment and selling prices will be called into question, however, if
the trend in demand fails to recover in the near-term horizon.”
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.