The opening quarter of 2016 ended with a slight uptick in the rate of expansion of the eurozone manufacturing sector. This was highlighted by the final Markit Eurozone Manufacturing PMI® rising to 51.6 in March, up from 51.2 in February and above the earlier flash estimate of 51.4.
However, this still represented the second-weakest improvement in manufacturing conditions for just over a year. The headline PMI is also still some way off the 20-month high of 53.2 reached at the end of last year, with the first quarter average (51.7) the lowest since the same quarter of 2015. The data suggest manufacturing grew by only around 0.2% in the first quarter, acting as a drag on the wider economy.
Rates of expansion in manufacturing production and new business ticked higher in March, recouping some of the momentum lost in the prior month. New export order growth slowed to a 14-month low.
National Manufacturing PMI readings signalled robust and accelerated rates of expansion in four of the countries covered by the survey (Italy, the Netherlands, Austria and Ireland) in March. Ireland topped the PMI growth rankings on the back of rising domestic and export sales.
Although Spain saw its pace of increase slow to a three-month low, growth remained solid overall. Italy, Spain and the Netherlands all saw gains in total new orders and new export business. In Austria, a slight drop in new export business suggested growth had been sustained by improved domestic market conditions.
With the exception of Greece – which remained at the bottom of the PMI rankings – weakness was largely centred on the ‘core’ countries of France and Germany. The German PMI continued to hover only marginally above the stagnation mark, while France slipped back into contraction. Both of the ‘big-two’ nations saw disappointing export trends. New export orders received in Germany were broadly unchanged. France registered a marginal decrease, exacerbating the already-weak domestic demand situation.
March saw a continuation of downward price pressures, as input costs and average output charges both declined. The reduction in selling prices was the steepest in over six years. There were widespread reports of price competition between companies in response to weak demand.
Deflationary pressures were especially evident in the ‘core’ nations, with France and Germany registering the sharpest decreases in output charges. With the exception of Austria – which posted a modest increase – all of the other nations covered by the survey also reduced their selling prices further.
Average input costs fell at a substantial pace that was only marginally less sharp than February’s six-and-a-half-year record. Input price deflation was marked across all of the nations covered by the survey, and especially steep in Germany.
Eurozone manufacturing employment increased for the nineteenth successive month in March. However, the rate of jobs growth was among the slowest registered during that sequence. Solid expansions in staff headcounts were reported in Italy, Spain, the Netherlands and Ireland. Greece also saw a slight increase. In contrast, France, Germany and Austria all bucked the trend in staff hiring, although rates of reduction were only marginal in the latter two countries.
