According to the latest monthly Reuters Eurozone Purchasing Managers Index (PMI), November’s data recorded a further sharp contraction of the Eurozone manufacturing economy.
Having been on a general downward trend since May 2000, PMI rose slightly in November, to 43.6 from October’s survey low of 42.9 but, at a level well below the critical no change mark of 50.0, the PMI continued to signal significant weakness of the manufacturing sector.
November’s modest upturn may simply reflect a slight correction from data affected by the immediate aftermath of the events of September 11 and the PMI remains at its second lowest level in the four-and-a-half year survey history.
Key findings from the report are:
• Order Books
The latest sharp contraction of the Eurozone manufacturing economy and the slight easing in the rate of contraction indicated by the Eurozone PMI, largely reflects a concurrent trend in the overall volume of new orders the region’s manufacturers have received over the last eight months. Measured overall, new orders declined sharply again in November, albeit at a modestly slower rate than in the previous month. At a national level, five out of the eight countries covered by this survey recorded a slight easing in the pace of contraction of demand during the month, including the region’s three largest economies – Germany, France and Italy. The general consensus amongst panel members about the cause of weaker order books was again that customers had cancelled and delayed orders as they were uncertain about the future economic outlook.
• Manufacturing output
Output has also followed a similar trend to new orders in recent months, as firms have revised production levels in response to changes in demand. Total output fell for the seventh successive month in November, albeit at a slower rate than in October.
• Employment levels
In order to reduce capacity and streamline production in line with fewer incoming new orders, Eurozone manufacturers trimmed employment levels for the sixth month running in November. Moreover, November saw the most aggressive round of job shedding recorded since the survey began in June 1997. With the exception of Greece (which recorded its first decline in manufacturing employment since the series began in May 1999), all of the Eurozone nations covered by this survey recorded an increase in the rate of contraction of employment during the month.
• Spare capacity
With production requirements falling and a number of firms deliberately running down current stocks in order to reduce costs, a greater amount of spare capacity emerged at suppliers in November, enabling them to improve delivery times for the eighth month in a row and at the same survey record rate as in the previous month.
• Price of raw materials
Finally, the average price paid for raw materials by manufacturers in the Eurozone continued to decline sharply during the month. In fact, a combination of weaker demand for raw materials and the falling cost of oil caused input price deflation to rise to the most marked seen since February 1999.
The indices are 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.
News source: NTC Research