The recovery in the eurozone manufacturing sector extended into its ninth consecutive month in March, rounding off a positive start to 2014. Although the final seasonally adjusted Markit Eurozone Manufacturing PMI® dipped to a three-month low of 53.0, from 53.2 in February, the average reading over the first quarter as a whole (53.4) was the best outcome since the second quarter of 2011.
March saw an evening out in the balance of the current upturn, as slowdowns in February’s top performers – Germany, the Netherlands and Austria – were largely offset by faster growth in Ireland (35-month high), Spain (47-month high) and Italy (2-month high) and a return to expansion in France that took its PMI to a 33-month peak. The Greek PMI edged back into contraction territory for the first time in three months. This mainly reflected sharp slowdowns in growth of output and new orders (in part by-products of weaker inflows of new export business) and another reduction in staff headcounts.
Eurozone manufacturing output, new orders and new export business all expanded for the ninth successive month in March. The rate of increase in output edged higher and, despite easing, growth of both new orders and new export business remained among the fastest during the past three years.
Germany saw solid growth of production and new business, despite rates of expansion for both cooling further from the 33-month peaks scaled in January. German manufacturers benefitted from a strong domestic market. New export orders also rose, but at the weakest pace since last October. The Netherlands also remained one of the stronger performers overall, although the growth rate of output eased to a five-month low.
France showed further signs of recovery, reflecting solid rebounds in new orders and new export business alongside an expansion of output for the second month in a row. Stronger growth of output, new orders and new export orders was also signalled in Spain and Ireland. Italy reported stronger trends for production and new export orders, but a weaker increase in total new orders.
Improved demand led to a further solid accumulation of backlogs of work at eurozone manufacturers, encouraging another slight increase in employment. Staffing levels have risen throughout the first quarter of the year.
Greece and the Netherlands were the only nations to report manufacturing job losses during the latest survey period. Ireland registered a solid increase in staffing levels, while jobs rose only marginally across the remaining nations surveyed.
On the price front, average input costs declined for the second month running in March, and at the fastest pace since July last year. Purchase prices fell in almost all of the nations covered, the sole exception being Ireland.
Strong competition led to a slight decrease in average output charges at euro area manufacturers during March, the first reduction since August 2013. Further price discounts were offered in Spain, Ireland and Greece, while charges fell in Germany, Italy, France and Austria following increases in February. The Netherlands was the only nation to register an increase in selling prices.
CHINA MANUFACTURING PMI: SLOW AND SLOWER
Business conditions in China’s manufacturing sector deteriorated for the third consecutive month in March. The latest deterioration was the strongest since July 2013, and reflected quicker reductions of both output and total new orders, despite new business from abroad expanding for the first time in four months. Firms cut their workforce numbers and purchasing activity, while both input and output prices fell to the greatest extent since August 2012.
After adjusting for seasonal factors, following the recent Chinese New Year festival, the HSBC Purchasing Managers’ Index™ (PMI™) posted at 48.0 in March, down from 48.5 in February, and signalled a moderate deterioration of the health of the sector. Business conditions have now deteriorated for three months in a row.
Chinese manufacturers reported lower intakes of new work in March, extending the current sequence of reduction to two months. Reports from panellists suggested that deteriorating market conditions weighed on client demand in the latest survey period. Data suggested that lower volumes of new work were largely a result of softer domestic demand, as new export orders increased for the first time in four months during March. Stronger client demand in Europe and the US was cited by a number of survey respondents.
Manufacturers cut their production levels for the second successive month in March, with panellists largely linking the fall to fewer new orders. Moreover, the rate of contraction quickened from February to the strongest since November 2011. Chinese goods producers reduced their purchasing activity in March. Furthermore, the rate at which input buying decreased was the strongest since September 2012. In contrast, stocks of finished goods rose in March due to fewer sales.
Lower intakes of new work enabled firms to reduce their level of outstanding business in March. That said, the rate of backlog depletion was only slight. Meanwhile,
staffing levels declined for the fifth month running, though the rate of job shedding eased to a marginal pace.Weaker demand for inputs led to a slight improvement in vendor performance during March. Panellists reported that suppliers cut their charges in response to
reduced demand, leading to the sharpest reduction in cost burdens since August 2012. Firms passed on lower production costs to clients and cut their selling prices at a similarly sharp pace.
