Light At End of Eurozone Tunnel?

04 March 2003

The first improvement in six months of downward movement was recorded in February by the Reuters Eurozone Purchasing Managers Index.

The data showed a marginal improvement in the zone – the eight largest European economies (Austria, France, Germany, Greece, Ireland, Italy, The Netherlands and Spain) within the twelve-nation euro currency zone and accounting for 92% of zone manufacturing activity – where the index rose from 49.3 in January to 50.1 in February.

For the first time since August 2002 this crept above the ‘no change’ mark of 50.0, reflecting what may be the first green shoots of recovery within the Eurozone manufacturing sector.

Key data from the indices are:

Manufacturing Output
The seasonally adjusted Manufacturing Output Index rose from 51.0 in January to 51.6 in February, registering a modest increase in production during the month and the fastest rate of growth for three months. Output trends varied markedly by country with the strongest growth recorded in Austria, followed by France, Italy, Greece and then Germany.

New Orders
The rate of growth of order books picked up on the modest pace seen in January, the index from 51.0 to 51.6, signalling the strongest – though still only sluggish – rate of increase for six months. Orders rose at the fastest rate in France, followed by Italy, Austria, Greece and then Germany (the latter increasing at the strongest pace for twenty-four months, largely due to improved export demand).

Raw Materials
The amount of raw materials purchased by manufacturers in the Eurozone fell, albeit only slightly, for the sixth month in a row in February as firms sought to cut inventory costs. Stocks of purchases likewise fell, but the decline was less steep than in January.

Delivery Times
The moderation in the rate at which manufacturers were found to have been cutting their purchases of raw materials was reflected in a slight lengthening of suppliers’ delivery times for the time in four months, as suppliers’ workloads increased.

Stock Inventories
Stocks of finished goods fell during the month, declining at a similar pace to that seen in previous months, largely as a result of deliberate policies of stock reduction designed to cut costs in the face of uncertain future demand.

The Eurozone PMI provides the first indication each month of Eurozone business conditions. It is not opinion-sourced, being based on answers to questions about real events asked of purchasing executives in some 2,500 companies. It is compiled by NTC Research and sponsored by Reuters.

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