RTTNews - The Purchasing Managers Index for the Eurozone manufacturing sector hit a 14-month high in August indicating improvement in activity as the 16-nation bloc moves away from deep recession, a survey revealed Tuesday.
The final Markit Eurozone manufacturing PMI rose more than initially estimated to 48.2 in August, a survey from the Markit Economics showed. The index stood above July's 46.3 and the flash estimate of 47.9. The final reading came in above the flash for the fifth month running.
However, the index stood below the no-change mark of 50 for the 15th month in a row suggesting contraction in manufacturing. A reading above 50 indicates expansion, while a reading below 50 signals contraction. This is the longest sequence of contraction in the survey history.
Production improved for the first time in fifteen months. France and Germany, the weakest performers during the height of recession, rebounded considerably in recent months. Italy, Spain and Ireland were the only countries to show lower levels of output.
For the first time since March 2008, new orders received by manufacturers increased in August. Germany, France, Spain, Austria, Greece and the Netherlands all reported higher levels of new business. Ending a 16-month period of reduction, the level of new export orders stabilized in August. France, Austria and the Netherlands all built on the recoveries.
Despite signs of recovery in most of the member states' manufacturing sectors, substantial job losses were witnessed in August. Employment has fallen in each of the last fifteen months.
Further, the survey found that backlogs of work fell to the least marked extent for 14 months. Stocks of purchases and finished goods both continued to drop at historically rapid rates in August. Subsequently the new orders-to-finished goods inventory ratio, which tends to move in advance of the production cycle, reached a 32-month high.
Average input prices dropped for the tenth month in a row in August with all nations excluding Greece reporting reductions. Meanwhile, August data pointed to a deep discounting of output prices, mirroring efforts on the part of manufacturers to support sales.
Markit Senior Economist Rob Dobson said, Looking ahead, the orders-to-inventory ratio is still elevated, the stock cycle remains supportive and export sales are showing signs of recovery, but rising unemployment and the continued need for deep price discounting remain major concerns.
The Markit/BME manufacturing PMI for the largest eurozone economy improved for the seventh consecutive month in August. With the turnaround gaining momentum in Germany, the index stood at 49.2 in August, up from 45.7 in July and flash reading of 49.
The Markit/CDAF survey showed that French manufacturing remained on path to recovery in August. The PMI rose to 50.8 in August from 48.1 in July. Economists expected the index to match the flash estimate of 50.2.
Italian manufacturers reported an eighteenth successive monthly deterioration of operating conditions in August. The Markit/ADACI PMI declined to 44.2 in August from 45.4 in July. This decrease was driven by a steep fall in output and new orders.
The Markit PMI for the Spanish manufacturing sector stood at 47.2 in August, indicating a broadly similar pace of deterioration of operating conditions as seen in the previous month.
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