Eurozone Manufacturing Shows Moderate Advance In February

Eurozone PMI increases in February for first time in four months, according to Royal Bank of Scotland report.

Reflecting an improvement in Eurozone business conditions for the 20th consecutive month, the seasonally adjusted RBS/NTC Manufacturing PMI rose for the first time in four months in February, up slightly to 55.6 from the 11-month low of 55.5 in January, according to statistics released Thursday by the Royal Bank of Scotland (RBS).

This improved performance indicated by the PMI is a result of stronger growth in new orders for February, which increased for the first time in four months,if only moderately.

The faster growth in part reflected stronger growth of export sales. Total new orders have now risen for 21 consecutive months. Still, the rate of increase has been a bit slower in recent months than the expansive growth seen throughout much of 2006.

The continued growth of new orders meant manufacturers again raised production in February, registering the 21st consecutive monthly expansion. The rate of growth of output picked up slightly from January's 11-month low, rising to a pace only marginally weaker than the average recorded throughout 2006, as shown in the Eurozone Manufacturing PMI survey data.

Manufacturers again boosted capacity by hiring more workers. Employment rose for the 12th month in a row, with the rate of increase slipping only slightly from January's six-year peak.

"The manufacturing sector continued to expand at a strong pace in February, with the survey's output index suggesting that Eurozone industrial production grew at an annual rate of close to 4 percent. The PMI rose slightly, largely on the back of improved export sales, which boosted growth of new orders. The survey's new orders index is consistent with order books growing at an annual pace of 8%. Although down slightly on the average seen last year, this rate of growth continued to cause widespread capacity problems and allowed manufacturers to raise prices as demand exceeded supply. During January and February this year, manufacturers' selling prices have risen at a pace not previously recorded by this survey," commented RBS Chief Euro Area Economist, Jacques Cailloux.