Eurozone: Manufacturing Downturn Deepens in March

April 2nd, 2013
in econ_news, syndication

Econintersect:  The latest PMI (Purchasing Managers' Index) for Manufacturing shows a renewed downturn underway in the Eurozone.  The index fell to 46.8 from 47.9 in February.  Readings below 50 indicate contraction and that is where this metric has been for eight consecutive months.  The following table shows the current readings for eight key countries.


Follow up:

Here is the summary from Markit:

Data collected 12-21 March.

  • Final Eurozone Manufacturing PMI at three month low of 46.8 (flash: 46.6).
  • Output and new orders fall at stronger rates, driving further job losses.
  • PMIs fall in almost all countries, with modest decline in Germany accompanied by steep downturns in France, Spain and Italy.

The depth of the collective contraction in Manufacturing PMI for the Eurozone is shown in the following graphic.


Much is made of the fact that all eight countries listed in the table above are now in contraction.  But that also happened for four months at the end of 2011.  See graph below.  In that case there was some recovery, although not robust, in 2012.  The difference in late 2011 was that the other nine countries in the EU-17 (Eurozone) where much stronger than now and the entire region PMI was well above 50 at the lowest point.  In the first quarter 2013 the entire Eurozone is weak.

Click on graph for larger image.


Here is the complete text of the Markit press release:


The downturn in the Eurozone manufacturing sector deepened in March. At 46.8, down from 47.9 in February, the seasonally adjusted Markit Final Eurozone Manufacturing PMI® fell to reach a three-month low and has now remained below the neutral 50.0 mark since August 2011.

Although the headline PMI was above its earlier flash estimate of 46.6 and the average for the first quarter as a whole (47.5) was the highest since the opening quarter of last year, March nonetheless saw a
worsening of manufacturing conditions across the currency union.  Germany and Ireland both fell back into contraction, while rates of decline gathered pace in all of the other nations covered by the survey with
the exception of France, though the rate of contraction in the latter remained deep and was only exceeded by that of Greece.

Manufacturing production contracted at the fastest pace in the year-to-date, as companies experienced a further solid decrease in inflows of new business.  Output fell in all of the nations covered by the survey with the sole exception of the stagnation seen in Germany.

March saw total new orders decline for the twenty-second successive month, dropping at the fastest pace since December.  Demand was weaker in both domestic and export markets, reflecting lacklustre client confidence.  The outlook for manufacturing also deteriorated, as the ratio of new orders-to finished goods inventories dipped to a three-month low.

Although companies continued to see rising demand from clients in North America and South Asia, intra-eurozone trade was often reported to have acted as an increased drag on order books.  New export orders resumed their downward trend as a result, having improved slightly for the first time in 20 months in February.

The Netherlands and Italy were the only nations to report increases in new export orders.  German producers reported a slight fall following marked growth in February, while Ireland and Spain reported declines for the first time in six months.  Rates of reduction accelerated in France and Austria, but eased sharply to an 11-month low in Greece.

Job losses were reported for the fourteenth straight month in March, with steep rates of declines reported in France, Italy, Spain, the Netherlands, Ireland and Greece.  Germany and Austria bucked this trend, with both raising employment following declines in the prior month.  Germany’s slight increase was the first in six months, while the rate of jobs growth in Austria hit an 11-month peak.

Price pressures were subdued in March, with average output prices and input costs both falling over the month. The decline in average input prices was the sharpest since July 2012.  Although the reduction in output charges remained only marginal, it extended the period of decline to three successive months.

Stocks were reduced again during March, as manufacturers cut back holdings of both finished goods and purchases.

Chris Williamson, Chief Economist at Markit said:

The Eurozone manufacturing sector looks likely to have acted as a drag on the economy in the first quarter, with an acceleration in the rate of decline in March raising the risk that the downturn may also intensify in the second quarter.
“The surveys paint a very disappointing picture across the region, with all countries either seeing sharper rates of decline or – in the cases of Germany and Ireland – sliding back into contraction.
Companies reported that signs of stronger demand from markets such as Asia and the US were countered by a renewed weakening of demand within the euro area, in turn reflecting deteriorating business and consumer confidence.
While in some respects it is reassuring to see that the events in Cyprus did not cause an immediate impact on business activity, with the final survey results even coming in slightly higher than the flash estimate, the concern is that the latest chapter in the region’s crisis will have hit demand further in April.”

In spite of the continued downturn in the Eurozone, the Global PMI still remained positive in March.


Markit Eurozone Manufacturing PMI® – final data (Markit press release, 02 April 2013)

Global Manufacturing:  Keeping Some Heads Above Water (GEI News , 02 April 2013)

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