Eurozone manufacturing activity slumps in March, UK returns to growth

Tom Brown

02-Apr-2024

LONDON (ICIS)–Eurozone manufacturing sector activity slumped further in March as a regional divide in performance continued to widen, with activity in the Mediterranean expanding and northern member states remaining mired in negative territory.

The sector’s purchasing managers’ index (PMI) slipped to 46.1 compared with 46.5 in February, a three-month low, as producers continued to reduce input purchases despite a decline in supply constraints from Red Sea freight disruption, according to S&P Global data.

A PMI score of above 50.0 signifies growth.

Growth expectations remained weak despite a gradual uptick in producer confidence as inflation continued to drop, driving hopes for rate cuts from key central banks and a stronger economic rebound.

The overall eurozone sector PMI masks a sharp divergence in fortunes between key member states. Greek manufacturing activity hit a two-year high at 56.9, with Spanish and Italian production also increasing month on month.

Production in the Republic of Ireland and the Netherlands was muted at near standstill territory, with output in France and Austria languishing at 46.2 and 42.2 respectively.

The weakest performing key eurozone economy during the month was Germany, where output fell to 41.9, the weakest since late 2023.

“The eurozone’s manufacturing sector usually runs on several cylinders, mainly the Euro-4 countries of Germany, France, Italy and Spain. Together they account for three quarters of the eurozone’s manufacturing industry,” said  Cyrus de la Rubia of Hamburg Commercial Bank, which helps to compile the PMI survey data.

“We currently have the unusual situation that two cylinders, Germany and France, are more or less out of action,” he added.

UK manufacturing showed signs of a recovery in March, jumping to 50.3 from 47.5 in February, and from a flash estimate of 49.9, marking the first time the sector has been in growth territory since July 2022.

New orders and supplier delivery times continued to improve, while employment and stocks of purchases deteriorated, albeit at a gentler pace than in February. Domestic demand drove new business inflows, with export flows remaining muted.

“Production and new orders returned to growth, albeit only hesitantly, following year- long downturns, with the main thrust of the expansion coming from stronger domestic demand,” said Rob Dobson, director at S&P Global Market Intelligence.

Manufacturing PMI

Country March 2024 February 2024
Austria 42.2 43.0
Ireland 49.6 52.2
Spain 51.4 51.5
Netherlands 49.7 49.3
Italy 50.4 48.7
France 46.2 47.1
Germany 41.9 42.5
UK 50.3 47.5
Greece 56.9 55.7

Thumbnail photo: A coal-fired power station in Mannheim, Germany. Source: Arnulf Hettrich/imageBROKER/Shutterstock

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