The recovery in the eurozone economy gathered pace at the start of the second quarter, with the combined output of the manufacturing and service sectors rising at the fastest pace for almost three years in April. The outlook for the upturn was also positive, with new orders and backlogs of work rising further and a return to growth for employment.
At 54.0 in April, unchanged from the flash estimate, the final Markit Eurozone PMI® Composite Output Index signalled expansion for the tenth successive month and reached its highest level since May 2011. Growth was again led by the manufacturing sector, with goods production showing its steepest gain since January. Service sector business activity rose at the fastest pace for 34 months.
Composite output growth was fastest in Ireland and Spain during April – reaching eight- and seven-year highs respectively – as inflows of new business strengthened in both nations. Germany and Italy also saw sharper expansions in activity and new orders. France was the only nation to buck this trend, treading water with near stagnant output growth and a slight drop in new business. The sluggish performance of France was mainly centred on the service sector, highlighting the ongoing weakness of the French domestic market.
Eurozone employment ticked higher for the second time in the past three months in April. Although the rate of expansion was only modest, it was nonetheless the sharpest registered in over two-and-a-half years. Ireland, Spain and Germany recorded increases in payroll numbers, with rates of jobs growth hitting a near-eight year high in Ireland and a two-month peak in Germany. The increase in Spain was the second so far this year, following a sustained period of reduction running through much of 2008-2013. In contrast, levels of employment continued to fall in France and Italy.
Input costs increased only slightly in April, rising at the slowest pace since last June. Manufacturers saw purchase prices fall at the sharpest pace for nine months, while service sector costs rose at the weakest rate in ten months. Italy registered a slight drop in input prices for the first time since June 2013, while Spain was the only nation to signal a faster pace of cost inflation.
Price competition among companies seeking to attract new business led to the sharpest drop in selling prices since August 2013. Output prices have now fallen for 25 successive months.
Services:
The Eurozone Services Business Activity Index posted 53.1 in April, unchanged from the earlier flash estimate and above March’s 52.2. The headline index has signalled an expansion of services output for nine successive months.Concurrent growth of business activity was registered in all five of the nations covered by the survey for the first time since May 2011. Rates of expansion hit an 86-month high in Ireland, an 85-month record in Spain and a two-month peak in Germany. Italy returned to growth, whereas the upturn in France eased to near-stagnation.
Underpinning the latest expansion of business activity was the sharpest growth of incoming new work since June 2011. New orders rose in Germany, Italy, Spain and Ireland, but fell slightly in France. The outlook for the eurozone service sector also remained positive, with business confidence* staying on the plus-side (despite dipping to a four-month low) and levels of outstanding business stabilising following a near three-year sequence of sustained declines.
This encouraged job creation at service providers, with a slight increase in employment registered for the third time in the past five months. Payroll numbers were expanded in Germany, Spain and Ireland, but reduced in France and Italy.
Input price inflation eased for the third month running in April, as average costs rose at the slowest pace since last June. This mainly reflected a sharp easing in the rate of increase in Italy to a 55-month low. In contrast, input price inflation accelerated in Germany, France, Spain and Ireland.
April saw output charges fall for the twenty-ninth month running, as companies cut prices to stimulate client demand. Only Germany and Ireland reported (negligible) increases in output charges. Rates of decline eased in Italy and Spain, but accelerated in France.
CHINA MANUFACTURING PMI REMAINS WEAK AT 48.1
Chinese manufacturers signalled a further deterioration in overall operating conditions during April. Both output and total new work declined over the month, albeit at
weaker rates than those recorded in March. Fewer new orders led firms to cut their staffing levels at a modest pace, while purchasing activity fell for the third
successive month. Meanwhile, both input costs and output charges fell markedly.After adjusting for seasonal factors, the HSBC Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of
operating conditions in the manufacturing economy – posted at 48.1 in April, down fractionally from the earlier flash reading of 48.3, and up from 48.0 in March . This
signalled the fourth successive monthly deterioration in the health of the sector.
Production at Chinese manufacturers fell for the third consecutive month in April, though at a weaker pace than in March. Panellists generally attributed the latest
reduction of output to fewer new orders, which decreased at a marked rate in April. Data suggested that sluggish domestic demand predominantly led to the fall in total new business, as new export orders declined only slightly. Weaker client demand was attributed by a number of survey respondents to deteriorating market conditions.Goods producers in China cut their staffing levels for the sixth month running in April, amid reports of company down-sizing policies which stemmed from lower production requirements. Moreover, the rate of job shedding accelerated from the previous month. Despite reduced workforce numbers, volumes of unfinished work fell for the third successive month in April. That said, the rate of backlog depletion was marginal.
Fewer new orders led manufacturers to cut back on their purchasing activity in April. However, the pace of reduction was only slight, having eased from that seen
in March. Firms also depleted their stocks of purchases at a marked rate in April, reflective of efforts to lower inventories in line with weaker client demand.Average input costs faced by Chinese goods producers fell for the fourth consecutive month in April. Despite easing from March, the rate of reduction was solid
overall. Factory gate prices also fell during April, and at a solid pace. Anecdotal evidence suggested that charges were cut to boost client demand.
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