Eurozone manufacturing output growth fastest for nearly 10 years

At 57.6 in April, up from 56.6 in March, the Markit Final Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to its highest level since June 2006 and came in slightly above its earlier flash estimate of 57.5.

The PMI – which is a weighted average of indices for new orders, output, employment, stocks and supplier performance – has remained above the neutral 50.0 mark for seven consecutive months.

April saw manufacturing production and new orders rise for the ninth successive month, growing strongly in both cases – although slightly slower than the flash estimates.

Manufacturing production expanded at the fastest pace since June 2000. Growth was led by survey record rates of increase in Germany and Austria. Output also rose in France, Ireland, the Netherlands, Italy and Spain. Greece was the only nation to report a contraction, albeit less marked than in March. The differential between the output indices of the strongest performer (Germany) and the weakest (Greece) was at its widest in the survey history.

Output expanded at a survey record rate in the intermediate goods sector and at the quickest pace for ten years at capital goods producers. Consumer goods output also rose, but to a much lesser extent than signaled by the other two sectors.

April saw new orders rise at a rate close to March’s near 10-year high, with the rebound in new work remaining broad-based by nation. Germany, Austria, the Netherlands and France reported the sharpest rates of growth. New orders also increased in Spain, Italy and Ireland. In contrast, Greece saw new orders fall for the eighth month running and at a quicker pace than in March.

Growth of new orders was driven by new export sales, which rose for the ninth month running. The rate of growth was similar to March’s ten-year high and in line with the earlier flash estimate. New exports rose at a record rate in the intermediate goods sector, while growth was also strong at capital goods producers.

There were reports of increases in new work received from customers in the United States, Asia, the United Kingdom and from within the euro area. Sales growth from outside the euro region was often attributed to the euro exchange rate.

Meanwhile, the new orders-to-inventory ratio stayed at an elevated level in April, indicating that manufacturers may need to raise production further during the coming months to meet improving demand. Further evidence that current sales are testing capacity was provided by a near-record increase in backlogs of work.

The need for firms to raise capacity helped the labor market move closer to stabilization in April. Although employment fell for the 23rd consecutive month, the decline was only marginal and the smallest since June 2008. It was also slower than the earlier flash estimate.

Jobs were added in Germany and Austria for the first time since September 2008 and April 2008 respectively. Rates of decline generally eased in the other nations covered. Greece reported the sharpest rate of job losses.

The amount of inputs purchased by manufacturers showed the second-largest rise in the survey history, bettered only by that signaled in April 2000. However, the rate of expansion was slightly less marked than the earlier flash estimate and insufficient to prevent a further (albeit slight) decline in inventories of raw materials.

April saw average purchase prices of inputs increase at the steepest pace since July 2008, with the month-on-month gain in the index level the second-sharpest in the survey history. A wide variety of chemicals, energy, metals, packaging, paper, plastics and timber products were reported to have risen in price. There were also reports of supply-chain factors contributing to raw material price rises, as highlighted by the greatest lengthening of vendor lead times since July 2000.

Average output prices rose for the first time in one-and-a-half years and at the quickest pace since September 2008.

Commenting on the PMI data, Markit chief economist Chris Williamson said: “At the Eurozone level, April’s final PMI data point to manufacturing output growth approaching double-digits as export-driven expansion hits a record pace in Germany and continues to surge in many other nations. Particularly welcome are signs that peripheral countries such as Ireland and Spain are now enjoying sharply faster growth. However, in stark contrast, Greece’s woes have deepened, with ongoing contraction and an accelerating downturn in export orders suggesting that the government’s growth forecast for 2010 is looking increasingly optimistic.”