Eurozone Manufacturing Index Soars to 15-Month High

04 November 2003

The Reuters Eurozone Manufacturing Purchasing Managers Index - produced for Reuters by NTC Research in conjunction with the European Council of Purchasing and Supply - rose from 50.1 in September to 51.3 in October, signalling the strongest monthly improvement in business conditions within the sector since July 2002.

But despite the significant growth both of new orders and output during the month, optimism was dampened by a further fall in employment. Key indicators from the seasonally adjusted October report are ...

The Manufacturing Output Index increased from 51.8 in September to 53.1 in October, registering the second consecutive monthly rise in production following five months of decline or stagnation. The latest rise was the strongest recorded since July 2002. Output rose in all countries surveyed, with the steepest rise seen in Austria, followed by the Netherlands. Looking at the big three national economies, Germany saw the fastest rate of growth, with output showing the largest monthly rise since February 2001. Output rose in France at the strongest rate since August 2002 and in Italy at the fastest rate since January.

New Orders
The New Orders Index rose from 52.0 in September to 53.2 in October, indicating a rise in new orders for the third successive month. The rate of increase has accelerated over this three-month period to reach the strongest since May 2002. Austria reported the fastest growth, followed by the Netherlands and then Germany. Of particular note though was a marked improvement in new orders in both France and Italy during the month, following near-stagnation in both countries in September. In both countries, growth hit an eight-month high in October. In contrast, growth of new orders in Germany slowed in October, albeit only modestly and from a thirty-three month high in September.

The rate of decline of manufacturing employment in the euro area eased to a fifteen-month low in October as fewer firms reported staff redundancies compared to previous months. The Employment Index rose from 47.0 in September to 47.9 in October. Eurozone manufacturing employment has now fallen for twenty-nine straight months, but trends varied markedly by country.

Raw Materials
The amount of raw materials purchased by manufacturers rose for the first time in fourteen months in October. Manufacturers reported the need to boost purchasing and rebuild inventory levels in line with higher output. Purchasing activity increased in all countries except Germany, where the rate of decline slowed to register only a marginal fall on September levels. Overall stocks of purchases consequently fell at the slowest rate since August of last year.

Delivery Times
Longer delivery times indicated the development of demand-pull inflationary pressures in the supply chain. Average input prices in fact rose for the first time in six months in October, driven up by higher global commodity prices as demand for basic raw materials continued to rise. The Input Prices Index rose to 52.3, up from 48.7 in September. Prices rose in all countries surveyed with the exception of the Netherlands.

Eurozone Manufacturing Indexes are based on the results of data supplied by purchasing executives in some 3,000 companies in Germany, France, Spain, Italy, Ireland, Greece, Austria and the Netherlands - together accounting for an estimated 92% of Eurozone manufacturing activity.

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