Growth of eurozone manufacturing production accelerated to a ten-month high in March, underpinned by the fastest expansion of incoming new business since April of last year. With the performance of the sector strengthening further, companies raised employment at the quickest pace
for over three-and-a-half years.
At 52.2 in March, up from 51.0 in February, the final seasonally adjusted Eurozone Manufacturing PMI® was above its earlier flash estimate of 51.9. The PMI currently stands at its highest level for ten months and has remained in expansion territory since July 2013.
The stand-out performers in March were Ireland and Spain, who stayed in first and second places respectively in the PMI league rankings. Improved growth was meanwhile seen in Germany, Italy and the Netherlands. Rates of increase in German production and new orders both surged to 11-month records, supported by the steepest gain in new export business since July 2014. Italy also registered solid and accelerated expansions of new work and output. For the Netherlands, however, growth of both variables was slightly slower than in February.
The other nations covered by the survey – France, Greece and Austria – all saw their PMI readings remain below the neutral 50.0 mark. On a mildly positive note, France and Greece at least saw their respective rates of contraction ease over the month. Austria, in contrast, sank back to the bottom of the PMI league table.
March saw the sharpest increase in new export orders* since April 2014, with growth registered in Germany, Italy, Spain, the Netherlands and Ireland. Companies reported that the weaker euro was the main factor driving new export orders higher. Manufacturing employment rose for the seventh successive month in March. The rate of job creation accelerated to a 43-month record. Workforce numbers were increased in Germany, Italy, Spain, the Netherlands, Ireland and Greece, but lowered in France and Austria.
The increase in staffing levels mainly reflected the ongoing improvement in the manufacturing sector, which also led to some reports that growth of new business was testing capacity at a number of firms. This led to a moderate accumulation of outstanding work for the first time in 11 months.
Cost pressures at eurozone manufacturers picked up in March, with input prices posting a modest gain following declines in the prior six months. Although the increase in average purchase prices was only mild, it nonetheless reflected a sharp movement in the trend compared to the prior month. This was reflected in a six-point gain in the Input Prices Index, one of the largest upward shifts in its level in the series history. Some companies linked the increase in input costs to higher import prices due to a weaker euro. Meanwhile, charges fell at the slowest rate in
the current seven-month sequence of reductions.
Chris Williamson, Chief Economist at Markit said:
“The final PMI reading signalled slightly stronger growth of the manufacturing economy than the preliminary reading, adding further to signs that the eurozone economy is reviving after last year’s slowdown. “Producers are benefitting from the weaker euro, which has had the dual effect of boosting competitiveness in export markets as well as making competing imports more expensive in the home markets.
“New orders are consequently showing the best growth for nearly a year, and the fact that manufacturers are boosting their payroll numbers at
the fastest rate for three-and-a half years indicates optimism that the upturn will be sustained in coming months.
“Rising demand is also helping firms and their suppliers to re-establish some pricing power. Factory input prices rose for the first time in seven months and selling prices were broadly stable, providing encouraging news that deflationary forces are easing.
“This is still a fledgling recovery, however, and the overall rate of expansion remains only modest. Importantly, manufacturing is still in decline in France, Greece and Austria, acting as drags on the region’s revival.”
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