Eurozone Signals Fastest Output Growth in Six Months

06 March 2007

HENLEY-ON-THAMES, UK: The eight largest European economies within the twelve nation euro currency area (Austria, France, Germany, Greece, Ireland, Italy, Netherlands and Spain) last month sustained January's rousing start to the new year, according to the latest monthly Report on Eurozone produced for the Royal Bank of Scotland by NTC Research.

The Eurozone Composite Output Index rose from 57.5 in January to 57.7 in February, indicating a marginal improvement in the rate of growth to a six-month high and the forty-second consecutive monthly expansion. Slightly slower growth in services was more than offset by an acceleration in manufacturing.

Key findings for February 2007:

  • New Business
    This rose sharply, although the rate of increase slowed to the weakest for twelve months, primarily reflecting slower growth in the services sector (in turn linked to softer domestic demand). Manufacturers saw a modest increase in new orders growth, helped by stronger export sales.

  • Work Backlogs
    Despite the easing, growth of incoming new business remained strong enough to cause backlogs of work to rise somewhat faster from January's 15-month low, increasing for the twentieth successive month. Manufacturing saw a far larger build-up of uncompleted work than services.

  • Employment
    Rising backlogs point to persistent capacity constraints, and employers subsequently took on more staff. The rate of increase slipped slightly from January's recent high, but the employment growth seen in recent months has nevertheless been the strongest for six years. Services continued to report stronger job creation than manufacturing.

  • Cost Inflation
    Lower energy prices helped to bring down input cost inflation slightly from January's five-month high, with rates easing in both manufacturing and services. Meanwhile, prices charged rose at a slower rate than December's record high, likewise slowing in both sectors.
The study asks questions about real events and is not opinion based. Data 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.

For further information on the Eurozone reports click here.

Data sourced from NTC Research (UK); additional content by WARC staff