First Eurozone Manufacturing Upturn in Thirteen Months

02 May 2002

The Reuters Eurozone Purchasing Managers Index – an indicator designed to provide an overall view of manufacturing conditions within the Eurozone – rose from 50.0 points in March to 50.7 in April, signalling the first expansion of activity since March 2001.

The index hit its all time nadir at 42.9 last October, since when it has risen strongly. France, Italy, Spain, Ireland, the Netherlands and Greece all reported an increase in activity during the month, with Greece reporting the strongest rate of growth. Although contraction continued to be recorded in Germany and Austria in April, in both cases the rates of decline eased.

Other data from the Eurozone Indices …

Manufacturing Output Index
This recorded 52.9 in April, up from 52.2 in March, to register the third consecutive monthly increase in production following nine months of continual decline. The rate of growth in April was the fastest since February 2001, indicating a strong turnaround in the performance of the manufacturing sector from the record rate of decline seen last October. All nations reported higher output, with the fastest growth seen in Greece, followed by France. The slowest growth was seen in Austria, followed by Germany.

Manufacturing New Orders Index
New orders for goods manufactured in the Eurozone rose for the third month in a row in April. The seasonally adjusted Eurozone Manufacturing New Orders Index edged up to 52.6 (from 51.8 in March) to register the fastest rate of increase since February of last year. All countries reported improved order books, with the strongest gain reported in Greece. The weakest rise was recorded in Germany.

Manufacturing Employment Index
At 47.6, the seasonally adjusted remained below the no change level of 50.0, thereby signalling falling staff levels for the eleventh month running. However, the rate of job losses slowed to the weakest since last September, reflecting the recent improvement in order books.

Manufacturing Input Prices Index
This rose sharply in April, up from 47.9 in March to 53.9, to indicate the first increase in average input prices for ten months. The rise in costs represents a marked contrast to the three-year record rate of deflation seen just last November. Higher input prices largely reflected rising oil prices, although a general firming of commodity prices was reported due to strengthening global demand from the lows of late last year. Stronger demand for inputs was reflected in a rise (albeit only modest) in the quantity of goods purchased by manufacturers for the second successive month in April following eleven consecutive monthly declines.

Raw Materials
With demand for raw materials now rising again, suppliers’ delivery times were reported to have lengthened for the first time in April, having shortened continually over the previous twelve months. Longer delivery times are indicative of a shift from a buyers’ market to a sellers’ market for manufacturing inputs.

Stock Levels
These continued to fall in April as manufacturers again reported the need to focus on cost reduction. Stocks of goods purchased by manufacturers fell for the thirteenth month running, with the rate of decline barely changed on that seen in March. Stocks of finished goods, on the other hand, fell for the seventh month running.

Eurozone Manufacturing Indexes are currently based on the results of surveys carried out in Germany, France, Spain, Italy, Ireland, Greece, Austria and the Netherlands. These countries together account for an estimated 92% of Eurozone manufacturing activity.

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