Market Trends Eurozone Manufacturing PMI falls

PMI data for the month of May signaled a further growth slowdown in the eurozone manufacturing sector, as inflows of new business from both domestic and export markets continued to rise at lacklustre rates.

The final Markit Eurozone Manufacturing Purchasing Managers’ index (PMI) posted a three-month low of 51.5 in May, unchanged from the earlier flash estimate and the second-weakest reading since February 2015. Six out of the eight nations included in the eurozone manufacturing survey reported expansions during May. The Netherlands, in first position of the PMI growth rankings, and third-placed Germany were the only countries to report faster rates of growth. Italy saw its pace of expansion ease to a three month low, while growth in Spain and Ireland was the weakest since October 2015 and July 2013 respectively. The Austrian PMI held steady at April’s subdued (albeit above euro area average) level of 52.0. PMI readings for France and Greece remained in contraction territory, both posting 48.4.

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Index in detail

Eurozone manufacturing production increased for the thirty-fifth successive month in May, albeit to the least marked extent since February. Underlying the latest slowdown in output growth was a weaker increase in new work received. The pace of increase in new business eased to a 15-month low. Panelists reported that conditions remained highly competitive in both domestic and export markets. New export business rose at the weakest pace since January 2015.

Only Germany, Italy, Spain and the Netherlands saw increases in new export business, although all reported slower expansions than in the prior month. May data provided further evidence of price discounting to support sales efforts and combat competitive pressures. Average selling prices fell for the ninth straight month, with none of the nations covered by the survey reporting an increase. However, the rate of charge deflation eased further from March’s six-year record to a five-month low.

Average purchasing costs, meanwhile, fell for the tenth month running in May. However, the rate of decrease eased to its weakest since the start of this sequence, in part reflecting recent firming of certain commodity prices (notably for oil).

Employment

Eurozone manufacturing employment rose again during May. The rate of jobs growth eased slightly and was a touch below the average for the current 21-month sequence of increases. Part of the expansion of capacity reflected a further accumulation of backlogs of work.

In line with the trend in production, staffing levels rose in all of the nations covered except France and Greece. Employment fell slightly in Greece, whereas France reported the steepest job cuts since August 2014. Among the nations reporting an increase in headcounts, only the Netherlands saw an improved pace of growth.

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