Euro area Manufacturing Growth Slows at Start of 2016

Euro area manufacturing grew at a slower pace in January, according to the latest figures from Markit.

The data from their purchasing manager’s index (PMI), placed manufacturing on 52.3 for the first month of this year, a fall from 53.2 that was recorded for December.

Although the index for manufacturing has been above the neutral 50 level for 31 consecutive months.

The report said despite the slower pace in headline growth, the outlook for the sector remained positive.

This was due to an increase in employment, and a higher backlog of work would suggest that their will be a continued upturn in the short to medium term future.

Input cost pressures also fell at an accelerated pace, and was reduced at one of the fastest rates in the last six and a half years.

Output charges fell to their lowest level since January 2015, and all euro area countries experienced a reduction in factory gate prices.

This is the first time that the decrease in these prices has been concurrent since February.

The sharpest decline in prices was found in purchasing costs, with the rate of price deflation at the second highest level in the past six and a half years.

All euro area nations benefited from this fall in prices, with Germany celebrating the largest reductions, while France had the weakest price fall.

Spain Top of PMI Table

In the breakdown of countries, Spain reached a eight month high and with a PMI rating of 55.4, and was the highest out of all the euro area members.

Ireland followed with a six month high score of 54.3, and Austria also broke through recent records with a two month high rating of 51.2.

In contrast, the Netherlands suffered an 11 month low of 52.5, while Italy’s manufacturing PMI was found to be at its lowest level for four months on 53.2.

France and Greece’s PMI was both rated on the neutral 50 score, this represented a five month and two month nadir respectively.

Export Order Inflow Increased

Export inflows into the euro area increased in January for the 31^st month running.

Germany, Italy, Spain, the Netherlands and Ireland all were boosted by a higher volume in exports, while France, Greece and Austria’s export activity contracted in January.

Employment in the manufacturing sector increased for the 17^th consecutive month.

All euro area members created more jobs in the sector, with accelerated rates of employment found in Germany, Italy, Spain, Greece and Ireland.

Euro Slips Against US Dollar

In the past 24 hours the euro has fallen from buying at a peak of $1.092 to currently buying $1.085.

The euro’s fall is despite the recent inflation figures released by Eurostat last week, which revealed that prices have hiked to 0.4% for January , in comparison to 0.2% for December last year.

Many analysts believe that inflation figures could turn negative as this year progresses, and that more stimulus will be announced by the European Central Bank, at their next policy meeting in March.

The euro is expected to be weakened due to the prospect of a further loosening in monetary policy.