Eurozone March manufacturing PMI positive, France returns to growth

LONDON (ICIS)–The Eurozone’s manufacturing sector registered in March its ninth consecutive month in the positive – a level above 50 – with France returning to growth and Germany cooling down slightly, economic analysis firm Markit said on Tuesday.

The final reading of the Purchasing Managers’ Index (PMI) in March stood at 53.0, slightly lower than February’s 53.2.  A reading above 50.0 signals expansion whereas below would signal contraction.

The average for the first quarter of 2014 stood at 53.4, the best outcome since the second quarter of 2011.

Chris Williamson, chief economist at Markit, warned however the slight easing in the rate in March raises the risk of production growth weakening further in April.

“Alongside the renewed fall in factory gate prices, signs of slower output and order book growth are a reminder that a self-sustaining recovery is not yet in place and reliant at least in part on price discounting to win sales. Such deflationary signals will continue to spook policymakers and raise the likelihood of further stimulus from the ECB,” said Williamson.

Despite a slower reading for the German economy, the eurozone as a whole benefited from France’s PMI of 52.1 – a 33-month high –  a return to growth after concerns had grown about the difficulties the French manufacturing sector was having in picking up. In February, France’s PMI stood at 49.7.

Germany, however, seems to have consolidated a trend of slower rate of growth in its manufacturing sector. The German PMI stood at 53.7 in March, a 4-month low on the back of new orders easing, companies reducing output charges and new export orders seeing their slowest pace of expansion since October 2013, according to Markit.

The other two big economies in the eurozone, Italy and Spain, recorded positive PMIs in March.

Italy continued to enjoy an upturn in export orders which helped it achieve a robust output growth, although the effect in manufacturing employment was “negligible”, said Markit. Italy’s PMI stood in March at 52.4, slightly higher than February’s 52.3.

Spain reached a 47-month high in March, with its PMI at 52.8, up from 52.5 in February. Markit said the country’s manufacturing sector had registered “sharper rises in output and new orders” in March although the improvement had no effect on employment, which actually decreased according to Markit.

Outside the eurozone, the UK managed to achieved a PMI of 55.3 in March, almost one percentage point lower than February’s 56.2, “signalling a further cooling of growth from the peaks scaled towards the end of last year,” said Markit.

Nevertheless, the UK’s PMI remains higher than its long-run average of 51.4 and has showed improvement in operating conditions in each of the past 12 months, concluded Markit.