Eurozone: Manufacturing Set to Edge Out of Doldrums?

02 September 2003

The Reuters Eurozone Manufacturing Purchasing Managers Index rose for the second consecutive month in August, up from 48.0 in July to a six-month high of 49.1.

Based on information provided by around 3,000 manufacturers across the Eurozone – the eight largest European economies (Austria, France, Germany, Greece, Ireland, Italy, The Netherlands and Spain) within the twelve-nation euro currency zone – the PMI provides 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.

But berets and lodenhuete are not yet being thrown in the air. Although the rise in the PMI reflects a stabilising of output and new order volumes in August, employment continued to contract following declines in previous months.

By remaining below the 50.0 neutral level, the index indicates a deterioration in business conditions for the sixth consecutive month, although the rate of decline is the slowest recorded over this period.

Key points arising from the seasonally adjusted PMI are …

The Manufacturing Output Index rose for the second month running to record 50.0 in August, signalling no overall change in production volumes on July. The stabilisation of production in August contrasted with declining output in the previous four months.

New Orders
At 50.1 in August, the New Orders Index rose above the 50.0 no-change level for the first time since February. Although signalling only the slightest increase in new orders, the August reading contrasted with falling orders over the previous five months and represented a steadying of demand for manufactured goods.

Manufacturing employment in the euro area fell for the twenty-seventh straight month in August. The rate of job losses eased for the third month running, resulting in the smallest monthly decline in staffing levels since February.

Input prices
Average input prices fell for the fourth successive month in August. Although remaining significant, the rate of decline eased on the eighteen-month record pace seen in July to signal the weakest drop in prices for three months. The slower rate of deflation in part reflected a firming of imported raw material prices due to the depreciation of the euro against the US dollar during the month.

Raw materials
The amount of raw materials purchased by manufacturers fell at the slowest rate for four months in August, in line with rising production requirements at many companies. Accordingly, stocks of purchases showed the smallest drop for five months, reflecting stock building in growing numbers of companies.

Delivery Times
Finally, the Suppliers Delivery Times Index slipped below the 50.0 level in August to signal a very marginal lengthening of lead-times (the first such lengthening for five months).

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