Manufacturing tempo has picked up in Europe with even Greece moving back into growth territory for the first time since August, 2009, Team IFM reports
Brussels, February 5: In a nod to rising economic confidence in the Euro zone, regional manufacturers went on a swift canter in January, riding a wave of new orders that revved production and fuelled the strongest rate of expansion since May 2011, data released earlier this week showed.
In a report, research group Markit said its economic indicator – the Purchase Managers’ Index or PMI – for the euro zone’s manufacturing sector in January rose unexpectedly to 54 from 53.9 in December, surpassing analysts’ expectation of it remaining unchanged at 53.9.
Outside the euro zone, factories in Britain too piggybacked fresh orders from home and abroad, prompting Markit’s senior economist to observe, “The long awaited rebalancing of economic growth may also finally be within sight.”
The performance of UK manufacturers bolsters the sentiments of Britain’s Office for National Statistics which has said the country is unshackling itself from recessionary fetters to slide into an upward groove.
Official data released last Tuesday said Britain registered its fastest growth in the fourth quarter last year since the 2007 global meltdown, with the growth mainly driven by the agriculture, utilities, services and manufacturing sectors.
Markit’s data also comes within days of a European Commission survey that showed economic confidence levels in the euro zone, being witnessed since May 2013, had continued in January.
The Commission’s Economic Sentiment Indicator – an index to gauge confidence – had gained ground both in the euro zone and European Union area. The most remarkable uplift was registered in case of consumer confidence, which rose to a 30-month high since July 2011, the Commission’s data showed.
The survey report attributed this to improved expectations from the job market and hopes of a better economic situation.
Euro Zone Output
Markit’s headline PMI for the euro zone rose each of the past four months and signalled growth since July last year. The improved performance was underpinned by expansions in production, new regional orders and new export orders, all of which rose at the fastest rates since April 2011.
“At its current level, the Output Index is signalling quarterly growth of at least 1 per cent,” Markit said. Importantly, the base of the recovery also broadened in January. Greece’s PMI moved back into growth territory for the first time since August 2009, joining the ongoing expansions seen in Germany, Italy, Spain, the Netherlands, Austria and Ireland.
The upturn was led by Germany, where growth hit a 32-month record. Rates of increase also remained solid in the Netherlands and Austria – despite a sharp easing in the Netherlands – while Spain was the only nation except Germany to see its rate of expansion quicken.
Apart from stabilisation in a number of domestic markets, companies attributed further expansion to rising levels of new export business as global market conditions continued to strengthen, Markit said. “Perhaps the most important development in the report is the further revival of manufacturing in the region’s periphery,” said Chris Williamson, Chief Economist at Markit.
With France and Greece both seeing returns to growth for new export business, all nations covered by the survey reported concurrent increases in exports for the first time since May 2011. “Both Italy and Spain are seeing robust growth of output and order books, and the Greek PMI’s rise above 50 for the first time since August 2009 is an important signal of how even the most troubled member states are returning to growth,” said Williamson.
Job creation was recorded for the first time in nearly two years during January. Although the pace of growth in payroll numbers was modest, it was still the steepest since September 2011, according to Markit.
Rates of manufacturing job creation accelerated in Germany (two-year record), Italy (32-month high) and Ireland (two-month peak), while employment also rose in Spain and Austria following periods of decline.
Meanwhile, job losses slowed in France and Greece, but the Netherlands reported a decrease in staffing levels for the first time in five months.
Higher employment represented a response by manufacturers to improved demand and the sharpest rise in backlogs of work for almost three years, both of which suggested that the expansion in output could run further in the coming months.
Signs of rising confidence were also provided by the steepest increase in input purchasing since mid-2011.
Price pressures were relatively muted during January. Input costs rose at the slowest pace for four months. The rate of output price inflation, meanwhile, was only moderate and the weakest since last October.
Germany, Italy and Austria were the only nations to report higher selling prices. “The German economy looks set for a strong performance in the first quarter of the year, which comes as a relief after official data indicated that German GDP increased a disappointing 0.4 per cent in 2013,” observed Markit economist Oliver Kolodseike.
Britain Rebounds
Like the stronger economies in the euro zone, Britain too did not disappoint. The seasonally adjusted Markit-CIPS PMI posted 56.7 in January, down from December’s 57.2
Although the PMI currently stands at its lowest level in three months, it is still well above the series average of 51.3. The headline index has signalled an improvement in operating conditions in each of the past ten months.
The strong upturn in manufacturing production was maintained in January, as companies scaled up output in response to stronger inflows of new orders. There were reports of improved demand from the domestic market and rising levels of new business from overseas.
The latest expansion in new export orders was broad-based by source, with UK manufacturers mentioning improved demand from North America, mainland Europe, Asia, Brazil, Scandinavia and West Asia.
Moreover, the ongoing improvement in global market conditions drove the rate of increase in new exports business to a near three-year record, Markit said.
The ongoing rebound in the sector led to further job creation at the start of the year. January saw employment increase for the ninth successive month, with the rate of jobs growth remaining close to November’s two-and-a-half year high.
The latest rise in payroll numbers was broad-based. Increases were reported by SMEs and large-sized companies and across the consumer, intermediate and investment goods sectors
“The broad base of the upturn is remarkable, with its benefits being felt across all product categories and at SMEs and large-scale producers alike,” said Markit’s economist Dobson. “The domestic market remains the main pillar of the rebound.”