Eurozone manufacturing recovers but unevenly

 
City A.M. Reporter
THE EUROZONE'S manufacturing sector expanded at its fastest pace in four months in November, although slightly slower than previously thought, as Germany and France continued to outshine smaller members, surveys today have revealed.

The Markit Eurozone Manufacturing Purchasing Managers Index (PMI) rose to 55.3 in November, nudged down from an earlier estimate of 55.5 but comfortably above the final reading of 54.6 for October.

While still firmly above the 50 mark that divides growth from contraction, the reading is some way off April's post-recession high of 57.6.

Manufacturers reported improved output last month, with the index rising to 55.8 from October's 54.7, but they still managed to build up a backlog of work, the survey of about 2,000 companies showed.

"November's PMIs showed that manufacturing conditions picked up at greatly improved rates in Germany and France. However, conditions are far less rosy in other parts of the euro zone," said Chris Williamson at Markit.

Today's data from Germany shows manufacturing expanded significantly faster last month than in October while France's PMI bounced to a level not seen in 10 years.

But Italian numbers showed conditions improved at their weakest rate for nine months and stagnation was seen in Spain.

Ireland, which accepted an €85bn (£71.5bn) European Union emergency aid package on Sunday, saw a slight upturn in activity but still below levels needed for a meaningful recovery.

A similar two-speed recovery is happening in the bloc's dominant service sector, according to flash numbers expected to be confirmed on Friday.

The European Central Bank is expected to leave interest rates on hold at a record low 1.0 per cent when it meets on Thursday – and at least until next October – as it battles to support the bloc's fragile recovery.

The bloc as a whole escaped from its worst post-war recession in the third quarter of last year. However, the recovery is expected to be slow and steady, with austerity measures introduced to tackle the region's debt crisis weighing on consumer sentiment.

Still, the euro zone PMI's backlogs of work index rose to 53.5 from October's 53.1 and has been above the 50.0 mark for a year, suggesting firms are accumulating work as the manufacturing-led recovery continues.

Data showed unemployment rose to 10.1 per cent in October, slightly up from the ten per cent seen in September, but the PMI survey showed manufacturing firms in the euro zone took on workers at the fastest rate last month since mid-2007.