Eurozone Manufacturing Pall Continues to Lift

03 July 2002

The Reuters Eurozone Purchasing Managers Index – an indicator providing an overall view of manufacturing conditions within the eight nations comprising the euro currency area (Austria, France, Germany, Greece, Ireland, Italy, The Netherlands and Spain) – crept slightly further above the ‘no change’ mark of 50.0 in June to record 51.8, up from 51.5 the previous month.

The PMI has now signalled growth throughout the second quarter of 2002. Nevertheless, despite remaining at a level unmatched since February 2001, the overall pace of Eurozone manufacturing expansion remained only modest and well down on levels seen throughout the second half of 1999 and throughout 2000.

The main points emerging from the study are …

Output and New Orders
The latest marginal improvement in the PMI principally reflected further positive (and strengthening) contributions from its output and new orders components. Measured overall, manufacturing production rose for the fifth month running in June and at the fastest rate in sixteen months as panel firms responded to the recent strengthening of their order books. As has been the case throughout the past three months, production rose across all main national economies covered, although there remained marked variations in the extent of the growth. In June, expansion was strongest in Greece and Ireland, closely followed by France and Spain. Meanwhile, growth was weakest in Germany, followed by Italy – where expansion slowed sharply over the month.

Manufacturing Orders
Eurozone also rose for a fifth consecutive month and at a marginally faster rate than in June, as the Eurozone Manufacturing New Orders Index recorded 53.1 – its highest level since January 2000. Ireland, France and Greece saw the strongest gains in orders during June as underlying demand continued to strengthen in these nations. In contrast, German manufacturing order books remained broadly unchanged over the month.

Despite the recovery in Eurozone output and new orders seen over the past five months, manufacturers continued to exercise caution with regard to increasing their workforces. In fact, with many companies keen to further trim excess capacity and improve productivity, manufacturing employment fell for the thirteenth month running in June, albeit at only a modest pace. As was the case in May, increased employment in Greece and Ireland, and marginal growth in Spain and Italy, were outweighed by the continued contraction of staffing levels in Germany, France, the Netherlands and Austria.

Delivery Lead-times
June saw a third straight month of lengthening delivery times, with average lead-times increasing at the sharpest pace since December 2000. This evidence of some imbalances in the supply and demand of inputs was borne out by the latest data on average input prices, which showed costs increasing at the fastest rate since January 2001.

The Eurozone Manufacturing Prices Index recorded 57.4 in June, up from 56.0 the previous month, as the costs of a wide variety of commodities were reported to have risen over the month. The overall pace of input price inflation nevertheless remained well down on levels seen throughout 2000.

Sponsored by Reuters, the data – based on real events and not opinion – are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease.

The Reuters Eurozone PMI provides the first indication each month of Eurozone business conditions, based on data collected from purchasing executives in around 2,500 companies. It is compiled by NTC Research.

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