The final Markit Eurozone Manufacturing Purchasing Managers’ Index (PMI) rose to a 20-month high of 51.2 in November, up slightly from 50.7 in October and above the flash estimate of 51.0.
The headline PMI – a composite index based on measures of production, orders, employment, inventories and supplier performance – has now posted above the neutral 50.0 mark for two successive months. Growth of output and new work received was the fastest for 26 and 27 months respectively and, for both variables, stronger than earlier flash estimates.
Manufacturing production increased for the fourth consecutive month in November, led by the strong performances of the intermediate and investment goods producing sectors. Higher output was also signalled at consumer goods producers, but the rate of expansion was lacklustre in comparison.
Disparities remained between the performances of member states in November. Growth was again predominantly driven by the big-two of Germany and France. The rate of expansion of output eased slightly in France, but remained amongst the strongest gains seen since mid-2006, while in Germany growth hit a 26-month high. Increased output was also recorded for the Netherlands (25-month high), Italian (26-month peak), Austrian and Irish (first gain since February 2008) manufacturing sectors. Production contracted further in Spain and Greece, with the rates of decline accelerating since October.
Eurozone manufacturing new orders rose in November at a slightly faster pace than the earlier flash estimate, meaning that growth of new work reached a 27-month high. The strongest gains in new business were recorded in Germany, France and the Netherlands. Spain and Greece were the only member states to report contractions.
New export orders rose for the fourth month running in November. The latest rate of increase was the steepest since January 2008 and marginally better than the flash estimate. Gains in new exports came despite the ongoing strength of the euro, reflecting increased intra-area trade and improving global market conditions.
Growth of total new orders and new export orders was signaled for intermediate and investment goods producers. Slight declines in both variables were reported in the consumer goods sector.
Although staffing levels fell less sharply than indicated by the flash estimate, the rate of decline was still fast by the historical standards of the survey and greater than in the previous month. Job losses were widespread, reported by all of the national surveys and by capital, consumer and intermediate goods producers. Rates of reduction were especially marked in Spain and Germany.
Backlogs of work increased slightly in November for the first time since March 2008, indicating that active capacity at manufacturers moved closer to current production requirements. Outstanding business rose at intermediate and investment goods producers, but fell in the consumer goods sector.
November data pointed to pipeline inflationary pressures building in the Eurozone manufacturing sector. Average input prices rose for the second month running and vendor lead-times (an indicator of supply-chain bottlenecks) lengthened to the greatest extent since August 2007. Input cost increases mainly reflected higher commodity prices and were steepest at intermediate goods producers. Average charges fell for the thirteenth month in a row, but the pace of decline was the second-weakest during that period.
Purchasing activity rose for the second successive month in November, but this failed to prevent a further marked reduction in holdings of raw materials – particularly at capital goods producers.
Stocks of finished goods fell for the 11th month running in November. Meanwhile, the forward-looking new orders to inventory ratio ticked higher from the earlier flash estimate, to hold steady at October’s 9.5-year high.
Commenting on the PMI data, Markit senior economist Rob Dobson said: “November PMI data suggest that the Eurozone manufacturing recovery gained traction, albeit from a low base, with output and new orders expanding at the fastest rates since Q3 2007. The rebound continued to be led by Germany and France but is broadening to other euro area nations, with the notable exception of the deepening recession in Spain. Looking ahead, the coordination of monetary policy will be complicated if Spain continues to lag the region as a whole.”