The recovery in the eurozone manufacturing sector gathered momentum in June. Growth of both production and new orders accelerated to the fastest in the year so far, taking the respective rates of expansion during the second quarter as a whole a tick above those achieved in quarter one.
The final Markit Eurozone Manufacturing PMI® posted a six-month high of 52.8 in June, up from 51.5 in May and above the earlier flash estimate of 52.6.
Growth was led by a resurgent Germany and Austria, where the rates of expansion accelerated to the fastest since February 2014 and May 2011 respectively. Upturns in Italy, Spain and Ireland also gathered pace, but slowed in the Netherlands. The Greek PMI moved back into expansion territory for the first time in six months, posting a 25-month peak of 50.4. The only nation to signal contraction was France. Moreover, the gap between the French and German PMI readings (6.2 points) was at its widest since the start of 2014.
Eurozone manufacturing output has now increased continuously for three years. The latest expansion was underpinned by rising levels of new business from both domestic and export markets.
Germany, Italy, Austria and Ireland all reported stronger growth of both production and total new orders volumes in June. Although output expanded at a quicker pace in Spain, the growth rate in new orders continued to soften. All five of these nations saw increased levels of new export business.
In contrast, France, the Netherlands and Greece all saw lower levels of new export business in June. This partly explained the slowdown in growth of output and new business in the Netherlands and the contractions in both variables in France. France also reported weaker domestic market conditions.
Eurozone manufacturing employment increased again in June. Moreover, the rate of jobs growth accelerated to the quickest during the current 22-month sequence of expansion. Higher employment was linked to stronger new business growth and the fastest accumulation of backlogs of work during the year so far.
Staffing levels rose at the fastest pace since January 2012 in Germany, and also accelerated in Italy, Spain, Austria and Ireland. Increased hiring was also seen in the Netherlands and Greece, whereas France reported further (albeit slower) job cuts.
The improved performance of the eurozone manufacturing sector also tested capacity at suppliers. Higher output led to the steepest increase in purchasing activity for seven months, which in turn led to the sharpest lengthening of vendor lead times since the turn of the year.
June data pointed to a further easing in price deflationary pressures at manufacturers. Input costs and output prices both fell only marginally, with rates of decline the slowest since August 2015 and December 2015 respectively. The weaker decrease in costs mainly reflected the recent firming of global commodity prices.
