EUROZONE MANUFACTURING PMI AT 52.7

The recovery in the eurozone manufacturing sector accelerated further at the end of 2013. The seasonally adjusted Markit Eurozone Manufacturing PMI® rose for the third month running to post 52.7 in December, up from 51.6 in November (and unchanged from the earlier flash estimate).

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For the final quarter as a whole, the sector is recording its best
performance in two-and-a-half years, consistent with a quarterly pace of output growth of around 0.6%.

The latest improvement in overall operating conditions was underpinned by solid and accelerated growth in the Netherlands, Germany, Ireland and Italy, while Austria continued to expand at a robust clip despite the rate of increase easing slightly since November. Meanwhile the Spanish
PMI moved back into expansion territory
. There was even relatively positive news from Greece, where higher levels of output and new orders elevated its PMI to a 52-month high and close to the 50.0 stabilisation point. France moved in the opposite direction, however, with its PMI falling to a seven-month low and signalling contraction for the twenty-second successive month.

Eurozone manufacturers reported further solid gains in both new orders and production, with the rates of expansion in December the steepest in over two-and-a-half years. Moreover, average rates of growth for both demand and output during the final quarter were higher than in the previous quarter.

The latest increase in new order inflows was underpinned by a solid improvement in new export business. New export orders rose for the sixth month running, and at a pace close to November’s two-and-a-half year peak. Among the nations covered, only France and Greece reported lower levels of incoming new export business.

With output, new orders and backlogs all rising, manufacturers held off from further job losses in December. The level of employment in the
eurozone manufacturing sector was broadly unchanged over the month, with job creation seen in Germany, Italy and Ireland. Workforces declined at slower rates in Spain and Greece, but at faster paces in France and Austria.

A further by-product of higher demand and improving confidence at manufacturers was the strongest increase in purchasing activity since May 2011. December saw average input prices rise for the fourth month running and to the greatest extent since October 2012. However, the rate of inflation remained subdued compared with the historical standards of the survey.

Part of the increase in input costs was passed on to clients, as selling prices also rose for the fourth straight month. Moreover, charge inflation hit a 21- month high. Output prices rose in Germany, Italy, Spain, the Netherlands and Ireland, and were broadly unchanged in France and Austria.

Douce France…

“France, however, remains a concern. While Germany, Italy and Spain are seeing the strongest output growth since early-2011, buoyed to varying degrees by improved export sales, France is seeing a steepening downturn, in part the result of widening export losses. This suggests that
competitiveness is a key issue which the French manufacturing sector needs to address to catch up with its peers.”

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