At 52.0 in July, down from June’s six-month high of 52.8, the final Markit Eurozone Manufacturing PMI® came in slightly above its earlier flash estimate of 51.9. The PMI has now signalled expansion for 37 consecutive months.
The main factor underlying the drop in the headline index was a softer positive contribution from new order growth. Incoming new business rose at a weaker pace than in June and to a lesser extent than the average for the year-to-date.
Although the rate of job creation also ticked lower, it remained among the fastest registered over the past five years. This partly reflected further solid growth in production volumes, which held steady at June’s six-month peak, and a further accumulation of backlogs of work. Inflows of new export business also improved during the latest survey month, albeit at a marginally slower pace, in part aided by the weak euro exchange rate.
The downside of the weaker currency was an increase in import costs that, alongside higher oil prices, led to the first increase in average purchase prices for a year. In contrast, output charges fell again, albeit to the smallest extent during the current 11-month period of reductions.
National PMI data indicated that five out of the seven nations for which data were available saw an improvement in operating performance during July. Slower growth was registered in three of the ‘big-four’ nations (Germany, Italy and Spain) while the downturn in France continued.
Germany stayed at the apex of the PMI growth rankings, as output expanded at the fastest pace since April 2014 despite a slight easing in new order growth. Germany also recorded the joint fastest increase in new export business (tied with the Netherlands) and solid job creation. Austria and the Netherlands were the next best performers and also saw marked expansions during July. In Austria’s case this reflected a slight deceleration from the recent highs in output and new order growth achieved in June, whereas the Netherlands posted mild accelerations. Both nations registered quicker rates of job creation.
The upturns in Italy and Spain lost momentum during July, with the Italian PMI and Spanish PMI hitting 18- and 31-month lows respectively. Italy reported weaker increases in production, new orders and employment. The picture was more mixed for Spain, with weaker output growth and a decline in new orders (the first since November 2013) contrasting with faster job creation.
France and Greece recorded contractions in output and new business at the start of the third quarter, despite both nations seeing improved inflows of new export orders. France also reported a reduction in staffing levels, the fifth in as many months. In contrast, Greece saw employment rise at the quickest pace in nine years.
Chris Williamson, Chief Economist at Markit:
However, dig deeper beyond the headline numbers and more worrying pictures appear. Expansions in output and employment are clearly being driven to a large extent by surging growth in Germany, while growth has almost stalled in both Italy and Spain and contractions are being seen in France and Greece.