Markit Flash PMI: Eurozone Downturn Intensifies

Econintersect:  The preliminary PMI  numbers (aka “flash” PMI) for various economies are published by Markit 7-10 days before the official final numbers are available.  The flash estimates for March 2013 for the Eurozone show a continuing decline into deeper contraction for the EU-17 countries.  The flash PMI closely tracks the final PMI number (usually within 0.2 to 0.3) and also closely correlates with GDP growth.

Click on graph for larger image.

Here is the summary from Markit:

• Flash Eurozone PMI Composite Output Index(1) at 46.5 (47.9 in February). Four-month low.
  

• Flash Eurozone Services PMI Activity Index(2) at 46.5 (47.9 in February). Five-month low.
  

• Flash Eurozone Manufacturing PMI(3) at 46.6 (47.9 in February). Three-month low.
  

• Flash Eurozone Manufacturing PMI Output Index(4) at 46.5 (47.8 in February). Three-month low.
  

Notes

1. The Composite Output PMI is a weighted average of the Manufacturing Output Index and the Services Business Activity Index.
2. The Services Business Activity Index is the direct equivalent of the Manufacturing Output Index, based on the survey question “Is the level of business activity at your company higher, the same or lower than one month ago?”
3. The Manufacturing PMI is a composite index based on a weighted combination of the following five survey variables (weights shown in brackets): new orders (0.3); output (0.25); employment (0.2); suppliers’ delivery times (0.15); stocks of materials purchased (0.1). The delivery times index is inverted.
4. The Manufacturing Output Index is based on the survey question “Is the level of  production/output at your company higher, the same or lower than one month ago?”

Here is the main text of the Markit press release (emphasis added by Econintersect):

The Markit Eurozone PMI® Composite Output Index fell from 47.9 in February to 46.5 in March, according to the flash estimate. The decline signalled an acceleration in the rate of contraction of business activity for the second consecutive month to the steepest experienced for four months.

With the exception of a marginal increase in January of last year, business activity has fallen continually since September 2011.

Manufacturing output fell in March at the fastest rate since December, while business activity in the service sector suffered the steepest decline since October.

Companies also reported that new business levels fell at the strongest rate for three months, dropping at the fastest rates since December and September in manufacturing and services respectively.

Employment fell for the fifteenth successive month, reflecting the need to reduce capacity in line with the ongoing deterioration in inflows of new orders and a further marked decline in backlogs of uncompleted orders. The rate of job losses eased slightly for the second month in a row, and was broadly in line with the average seen throughout last year. Rates of job losses eased in both manufacturing and services.

Average input costs in the Eurozone private sector showed the smallest rise since last July. In the service sector (where wages are included), input prices rose at the slowest rate since July 2010, while manufacturers’ raw material prices fell for the second consecutive month, dropping at the steepest rate since last July.

The easing in cost pressures encouraged both manufacturers and service sector companies to lower their selling prices again in March, linked in many cases to the need to compete on price in the face of  weak demand.

Looking ahead, two key indicators suggest that business activity trends could disappoint again in April. In the service sector, business expectations for the coming year fell to a three-month low, while in manufacturing the forward-looking new orders-to inventories ratio likewise fell to the lowest since December.

Business conditions again varied markedly by country, notably among the two largest euro member states. In France, output across both manufacturing and services contracted at the fastest rate since March 2009.  Meanwhile in Germany output rose for the fourth  successive month, albeit at the weakest pace since December.

Across the rest of the Eurozone, output fell on average at the steepest rate since November, with the rate of decline accelerating for the second successive month.

The divergence of Germany from the rest of the Eurozone as well as the newfound extreme weakness of France is evident in the following graph:

Click on graph for larger image.

A GEI Opinion article today by Hilary Barnes offers a less pessimistic assessment of the severity of the slump in France.

Additional graphics from Markit:

John Lounsbury

Source:

• Eurozone downturn intensifies for second month running in March (Markit press release, 22 March 2013)