The Reuters Eurozone Purchasing Managers Index for March 2002 rose 1.4 points to 50.0 – the first time in exactly twelve months that it has not indicated outright manufacturing contraction.

The rise reflects improving manufacturing business conditions in each of the eight Eurozone nations, which together account for an estimated 92% of Eurozone manufacturing activity.

The French, Italian, Spanish, Irish and Greek manufacturing economies all registered slight growth while slowing rates of contraction were recorded in each of the German, Austrian and Dutch manufacturing economies. Key findings of the monthly survey are …

Production and New Orders
Having risen only marginally in February, overall manufacturing order books recorded more robust growth in March as panel members reported a strengthening of demand from both within the Eurozone and from export markets. After accounting for seasonality, the New Orders Index recorded 51.8 in March, up from 50.1 in February and its highest level since February 2001. With the exception of Germany and Austria (where orders fell more modestly than in recent months), each of the national manufacturing economies reported an increase in orders over the month, with the strongest gains reported in Greece, Italy and France.

Manufacturing Demand
Firmer manufacturing demand in March stimulated a further expansion of overall output levels within the Eurozone. Production rose for the second straight month in March and at the sharpest rate in exactly a year as an increasing number of firms stepped up their output. With the exception of Austria, each of the national economies surveyed saw varying rates of growth of production over the month. The Output Index recorded 52.2 from 51.1 one month earlier.

As was the case in February, March’s survey data suggested that the latest increase in Eurozone manufacturing production had again been achieved without any significant expansion of capacity levels. Continued concerns over the exact extent and duration of any recovery meant that a significant proportion of manufacturers across the Eurozone remained reluctant to take on additional staff. In fact, in many cases staff continued to be laid off as part of efforts to trim capacity and improve productivity. Overall employment fell for the tenth month running as a result, although the rate of decline was the weakest since last September.

Purchase Inventories
Evidence that sufficient capacity existed at the majority of companies to cope with current levels of business was underlined by the March figures on stocks of purchases. Inventories of inputs fell for the twelfth consecutive month as increased output requirements were generally sourced directly from stocks. Nevertheless, a marginal recovery in purchasing activity was reflected in a further easing in the rate at which average delivery times shortened and a slowing in the rate of input price deflation. Despite falling for the ninth successive month in March, the extent of the decline in input costs was the least marked since prices began to fall last July.

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