Eurozone Manufacturing Hits Four-Month Low in August

04 September 2002

The Reuters Eurozone Purchasing Manager’s Index – an indicator designed to provide an overall view of manufacturing conditions within the Eurozone – registered 50.8 in August, down from 51.6 in July.

Although down by 0.8 points, the August PMI remained above the 50.0 (no change) mark, signalling an expansion of manufacturing activity for the fifth month running. It also registers a continuation of the recovery from last year’s downturn – albeit at a weaker rate for the second month in succession.

The Eurozone comprises the eight largest European economies (Austria, France, Germany, Greece, Ireland, Italy, The Netherlands and Spain) within the twelve-nation euro currency zone. Key details from PMI are …

At 52.5 in August, the seasonally adjusted Manufacturing Output Index signalled an increase in production for the seventh successive month. However, the index fell for the second month in a row, dropping from 53.4 in July to register the weakest monthly increase in output since March. Growth slowed in all main economies with the exception of Italy, where a very marginal increase in the rate of growth was recorded. The slowest growth was again seen in Germany, where the rate of expansion was the slowest for five months. However, particularly sharp downturns in the pace of growth were noted in Ireland, France and Greece. The fastest growth was seen in Greece, despite the slowdown, followed by Austria and then Italy.

New Orders
The Manufacturing New Orders Index fell from 53.1 in July to 52.1 in August. At a level above the 50.0 no change mark, the index signalled an overall increase in new orders for the seventh month running, but the rise was the weakest since March. The pace of growth was dragged down primarily by a fall in new orders in Germany for the first time in five months. Orders rose in all other euro economies covered by the survey, but in all cases the pace of growth slowed, with Ireland, Austria and France seeing the steepest downturns.

Stocks of finished goods fell, but only modestly and to a lesser extent than in July as unexpectedly slower growth of demand caused the unwanted build up of stock in some companies - notably in Germany and Austria, where stocks rose in August. Stocks fell in all other countries.

The Manufacturing Employment Index registered an overall drop in employment for the fifteenth consecutive month in August. Dropping from 49.2 in July to 47.5 in August, the index also signalled an acceleration in the rate of job losses to the highest since March. The increase in the rate of decline in employment in August contrasts with an easing in the pace of job losses seen throughout the previous six months. The latest survey showed that modest increases in employment in Ireland and Greece were offset by a contraction of the labour force in all other economies covered by the survey. The sharpest decline was seen in Germany, followed by the Netherlands.

Input Prices
The Manufacturing Input Prices Index remained above 50.0 to indicate an increase in average input costs for the fifth month in a row. However, the index fell from 58.7 in July to 55.2, registered a significant easing in the rate of expansion from the eighteen-month peak seen in the previous month. All countries reported a reduction of input cost pressures, most notably Austria, where prices in fact fell for the first time in five months.

Suppliers Delivery Times
Suppliers’ delivery times lengthened for the fifth month running in August as the sixth consecutive monthly increase in raw material purchases by manufacturers added to suppliers’ workloads. However, the rate of growth of purchases slowed for the second month running, and the incidence of supplier delays was unchanged on July.

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