Eurozone manufacturing expanded at a fractionally slower rate than originally thought last month. A 51.0 final PMI print was just a tick down on the flash estimate and unchanged from the final January figure.
The rate of output expansion also matched January despite a minor pickup in new orders growth to a 7-month high. Disappointingly, the acceleration in total orders was wholly attributable to increased momentum in exports which helped to mask subdued domestic market conditions. Even so, employment crept higher for a sixth successive month and at its sharpest rate over the period. Backlogs were broadly unchanged. Price pressures predictably remained very weak and deflation in input costs was only slightly less than January's five-and- half-year record. Factory gate prices decreased for a sixth straight month.
Regionally, Ireland (57.5) was easily the best performer and indeed its PMI saw a 182-month high. Spain (54.2) was second in the ladder ahead of the Netherlands (52.2) and Italy (51.9). However, the core countries underperformed with Germany (51.1) registering only modest growth and France (47.6) again well into negative growth territory and, moreover, at the bottom of the international table.
The final February results suggest that manufacturing will provide little help to Eurozone economic growth this quarter. The sector at least appears to be expanding but so slowly as makes little difference and the sluggishness of the two core members is a real concern. With inflation so soft this month's launch of QE should be welcomed at home and abroad despite German concerns.
Purchasing Managers' Manufacturing Index (PMIs) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy by tracking changes in variables such as output, new orders, stock levels, employment and prices across the manufacturing sectors.
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index in the U.S. and the Markit PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.
The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.
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