European Manufacturing Index Rises for First Time in Five Months

04 August 2003

Decline slows for new orders and output

• The Reuters Eurozone Manufacturing Purchasing Managers Index (PMI) rose for the first time in five months in July, up from 46.6 in June to a four-month high of 48.0 (a number below 50.0 signals contraction).

Eurozone – the eight largest European economies (Austria, France, Germany, Greece, Ireland, Italy, The Netherlands and Spain) within the twelve-nation euro currency zone – registered an overall deterioration of manufacturing business conditions for the tenth time in the past eleven months.

On the positive side, however, July’s PMI increase softened the rate of decline to its slowest since March and improved business and consumer confidence, while the exports loss rate also bgan to level off.

The report, adjusted for seasonal factors, highlights …

Manufacturing Output
The index registered a contraction of production levels for the fourth month in a row. However, the rise from 48.1 in June to 49.2 in July signals an easing in the rate of decline – the most encouraging trend in three months.

New Orders
The New Orders Index rose from 45.7 in June to 48.8 in July, its steepest upward move since February 2002 and the most marked slowing of the rate of decline since March.

Available jobs continued to fall in July as companies remained intent on reducing costs. Employment has now fallen for twenty-six consecutive months and, despite slowing over the past two months, the pace of decline remains close to the sixteen-month high seen back in May.

Input Prices
Average input prices fell sharply in July, dropping for the third consecutive month. The pace of deflation was the strongest since January 2002 and represents a marked contrast to the significant oil price related growth of costs seen in the first quarter of the year.

Raw Materials Purchases
The amount of raw materials purchased by manufacturers fell at the slowest rate for three months in July as more firms stepped-up their purchases to meet higher production needs. But overall materials stocks continued to fall as firms focused on containing costs. Stocks of finished goods likewise fell, but in many cases this reflected faster than expected sales rather than deliberate destocking.

Delivery Times
These were largely unchanged in July, suggesting the absence of supply-chain bottlenecks,

The Reuters Eurozone Manufacturing PMI is based on information provided by around 3,000 manufacturers across the euro currency area. It reflects hard data on recent changes in activity levels rather than business sentiment or expectations.

Data sourced from: NTC Research; additional content by WARC staff