Output and New Orders Return to Growth: Reuters

01 March 2002

The Reuters Eurozone Purchasing Managers Index rose for the fourth month running in February, increasing from 46.3 points in January to 48.6 – a level well above the survey record low of 42.9 seen last October.

Although the PMI – which covers the eight Eurozone nations (Germany, France, Spain, Italy, Ireland, Greece, Austria and the Netherlands) – remained below the ‘no change’ mark of 50.0 indicating contraction of manufacturing activity for the eleventh successive month, the rise in the index signalled an easing in the rate of decline to the weakest for ten months.

Growth varied markedly by national economy, with the PMIs for Greece, Italy and Ireland all above the 50.0 mark in contrast with Germany, France, Spain, Austria and the Netherlands which all continued to contract.

In general …

Production and Order Books
Rose for the first time in ten months, while order books improved for the first time in eleven months. Although in both cases the rises were only marginal, the return to growth represents a significant contrast to the survey record rates of contraction seen last October.

Only in Spain and Austria was output reported to have fallen in February. Meanwhile, the strongest pace of growth of output was recorded in Italy, followed closely by Greece.

Although output and new orders rose during the month, employment fell for the ninth consecutive month as firms continued to focus on cost cutting in the face of uncertain economic prospects and still weak demand.

Job Losses
The rate of job losses eased, however, slowing to the weakest recorded for five months. Only in Italy and Greece did employment rise, while the sharpest drop in employment was recorded in Austria, followed by Germany.

Cost cutting was also reflected in a fall in purchases of inputs by manufacturers for the eleventh straight month in February (although the decline was the smallest since last March). Weaker purchasing caused stocks of purchases to fall for the fourteenth time in the past fifteen months. Stocks of finished goods also continued to decline, attributable to deliberate cost-cutting inventory control policies.

Reduced purchases of raw materials by manufacturers were again reported to have led to excess stocks and spare capacity at suppliers, which allowed supplier delivery times to shorten for the eleventh consecutive month in February. However, the rate of improvement of delivery time performance eased for the fourth month running due in part to a strengthening of demand for certain goods from the lows of late last year.

Excess Stocks / Capacity
The existence of spare stocks and excess capacity at suppliers was again reported to have created a buyers’ market for many goods. Average prices paid by manufacturers for goods fell for the eighth successive month as a result. The rate of deflation slowed for the third month in a row, however, reflecting the hardening of demand for certain goods.

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