The Reuters Eurozone Purchasing Managers Index, a monthly report on manufacturing conditions within eight of the twelve EU nations embracing the euro currency – Germany, France, Spain, Italy, Ireland, Greece, Austria and the Netherlands – hit a fifteen month high in May.

Although rising for the seventh successive month since the survey’s record low of 42.9 last October, and moving into expansionist mode for the second month running, the current PMI level is consistent with only modest growth of the manufacturing sector.

Highlights from the May data are:

• The Eurozone Manufacturing Output Index hit a fifteen month high in May, rising from 52.9 in April to 53.4. Output has now increased for four successive months, having contracted continually over the prior nine months. Output rose in all main national economies, although the pace of growth slowed slightly in both France and the Netherlands. National performance in fact varied markedly, although the growth differential between fastest and slowest growing countries narrowed slightly during the month. The fastest growth was recorded in Greece in May, followed by Spain and then Ireland. In contrast, the slowest growth was again seen in Germany, followed by the Netherlands and then Austria.

• The Manufacturing New Orders Index registered the fastest rate of increase since January 2001, recording 53.0 in May from 52.6 in April. The latest rise was the fourth consecutive monthly improvement in order books. However, although well up on the survey low of last October, the rate of increase remained subdued compared to the survey peak seen in April 2000 (when the index hit 62.4). All countries reported improved order books, with the strongest gains reported in Spain and Greece. The weakest rise was again recorded in Germany, where the pace of growth in fact fell marginally.

• The Manufacturing Employment Index at 49.1 in May, remained below the ‘no change’ level of 50.0 to register an overall drop in staff levels for the twelfth consecutive month. However, the decline was only modest and was the weakest recorded for nine months. Higher employment in Greece, Spain, Italy, France and Ireland was offset by net job losses in Germany, Austria and the Netherlands.

• The Manufacturing Input Prices Index rose sharply again in May, up from 53.9 in April to 56.0, indicating the second month in a row of rising prices and the fastest rate of input cost inflation for fifteen months. Higher oil prices and general upward pressure on commodity prices due to strengthening demand were the principal causes. However, although signalling significant upward price pressures, the Prices Index remained well below the peak of 76.5 recorded two years ago.

Suppliers’ delivery times lengthened for the second month running in May, contrasting sharply with the widespread reports of quicker deliveries noted throughout much of last year and indicating a return to more normal levels of stock holdings at suppliers in recent months following active destocking. Manufacturers’ stocks of both purchases of raw materials and finished goods both fell again in May, but in both cases the rate of decline slowed.

The eight nations surveyed account between them for an estimated 92% of all Eurozone manufacturing activity.

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