Eurozone Employment Still Falling as Economy Soars

03 February 2004

A closely watched indicator of manufacturing prosperity within the Eurozone -- the eight largest European economies (Austria, France, Germany, Greece, Ireland, Italy, The Netherlands and Spain) within the twelve-nation euro currency zone -- reached a three year high in January.

The Reuters Eurozone Manufacturing Purchasing Managers Index rose from 52.4 to 52.5, the fifth upward month in succession. However, there is little doubt the rise would have been greater but for the continuing increase in unemployment, attributable in part to the strength of the euro against the US dollar.

Key indicators from the seasonally adjusted PMI are …

Manufacturing Output
The Output Index edged up from 54.5 in December to 54.6 in January, indicating an increase in production for the fifth month running and a marginal improvement in the rate of growth. The latest rise in output was the strongest since January 2001. Output rose in all countries surveyed, with the fastest growth in Austria, followed by France and then Germany.

Manufacturing Stocks
Despite the rise in output, stocks of finished goods contracted at the steepest rate for four years as the latest increase in production was insufficient to meet the strength of sales and order book growth.

New Orders
These accelerated in January by the fastest rate recorded since September 2000. The New Orders Index rose from 55.1 in December to 55.4. New orders have now risen for six straight months, with the rate of increase accelerating over this period.

Input Supplies
The amount of goods purchased by manufacturers rose for the fourth successive month, increasing at the fastest pace since November 2000. Additional raw materials were needed primarily to meet higher production requirements, although growing instances of firms building safety stocks were also recorded, driven by fears of rising prices and supply shortages.

Suppliers’ Delivery Times
The Delivery Times Index recorded 47.0 in January, registering a lengthening of delivery times for the sixth month in a row with the number of delays unchanged on the three-year high seen in December. Suppliers were reported to have been busier as manufacturers’ demand for raw materials continued to rise.

The Purchasing Managers Index, compiled by NTC Research, is based on information provided by around 3,000 manufacturers across the Eurozone. It reflects hard data on recent changes in activity levels rather than business sentiment or expectations. As such, the index provides the earliest indication of actual business conditions.

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