The final RBS/NTC Eurozone Manufacturing PMI came in at 50.7 in April, down from 52.0 in March and slightly below the earlier flash estimate of 50.8. The fall in the PMI was the largest for six months and took the index to its lowest since August 2005.
National trends among the big-four euro nations varied markedly again in April, as did production by sector, with consumer goods producers reporting a survey record decline in output.
The PMI (Purchasing Managers' Index) was particularly weak, registering the first decline in new orders since May 2005 (in line with the flash reading). New export orders fell by marginally more than indicated by the flash reading, also declining for the first time since May 2005 due to softer economic growth in key foreign markets and the strong euro.
Among the big-four euro countries, only Germany recorded an increase in new orders, though the rise was the smallest for three months. This deterioration was primarily the result of a substantial easing in growth of new export orders at German manufacturers. Spain and Italy both saw new orders fall at the steepest rates since December 2001.
In a sign of broad-based weakness of production to come in future months, new orders for consumer, intermediate and investment goods (such as plant and machinery) all fell in April, albeit only marginally in the case of investment goods. Consumer goods producers saw the sharpest monthly drop in new orders in the survey’s ten-year history, in part reflecting lower levels of new export orders.
``Germany will do better than average,'' said Dominic Bryant, an economist at BNP Paribas in London, in a research note to investors. ``At the other end of the spectrum, Italy and, in particular Spain, will have a very tough year with growth well below trend.''
German PMI
German manufacturing activity weakened to its slowest pace in four months in April, but held above its long-term average thanks to robust expansion in output. A dip in new orders growth, however, suggested pressure on output may increase in coming months and the pace of job creation slowed to the weakest since October.
The NTC/BME Purchasing Managers' Index (PMI), based on a survey of 400 firms, slipped to 53.6, adjusted for seasonal swings, from March's seven-month high of 55.1, NTC said.
"The manufacturing sector remained on a healthy footing at the start of the second quarter, with production rising at a robust and above-trend rate," said NTC economist Tim Moore. "However, output growth was again slower than the peak of the current growth cycle and will likely come under pressure in the months ahead following the relatively subdued improvements in new order volumes recorded on average in 2008."
A measure of output rose to 55.3 in April from 54.7, NTC said. By contrast, a gauge of employment fell to 54.2 from 56.5 and a measure of new orders dropped to 52.5 from 54.9.
An NTC gauge of new export orders signalled the second-weakest increase for around three years, falling to 51.8 from 54.0.
"There were reports that the strong euro and deteriorating economic conditions in the United States had both weighed on export demand," the group said. NTC chief economist Chris Williamson said the impact of the strong euro was most discernible in the consumer goods sector in April's survey. "Whether that's down to the euro or just general easing of consumer sentiment in key trading partners like Britain and the United States remains to be seen," Williamson said. "There are problems in competitiveness creeping in because of that strong euro on a broadbased scale," he added. On prices, Moore said a surge in steel and energy costs had underpinned a sharp increase in average cost burdens last month, with the rate of inflation only just below March's eight-month high. "April data suggest that the spike in pipeline inflationary pressure has begun to make its way to the factory gate, as output prices rose at the third-strongest pace in the series history," Moore added
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