Manufacturing Sees Continued Expansion In The Eurozone

Despite output and new orders reaching fifteen-month lows, at 55.4, the April PMI showed continued strength in the area.

EDINBURGH, Scotland - The Royal Bank of Scotland (RBS) released Friday its PMI report for the Eurozone. At 55.4, the April PMI is an indicator of strength in the region’s manufacturing sector.

Ouput and new orders, however saw record lows. Output was at 56.9, down from March’s 57.5 and experiencing its weakest rate of growth since January 2006. New Orders, at 55.8 was down from 56.4 in March, representing the weakest rise in fifteen months. Though down, both are above the 50.0 mark that signals expansion.

Employment in the region has risen for the past 14 months. For April, the index was 53.3, up from 52.9.

Backlogs of work increased at its weakest pace since January 2006, due to an ease in new business growth and capacity expansion initiatives.

Higher energy prices and increased demand for raw materials continued to drive input prices, though the rate of increase eased to 65.6 from 66.1. Output prices also rose, but the rate of inflation slowed the rate of increase to its weakest level in over a year.

“The latest PMI survey suggests that Eurozone industrial production rose at an annual rate of around 4 percent in April, but signs have appeared that competitiveness in foreign markets has been hit by the euro's strength, notably against the U.S. dollar,” commented RBS Chief Euro Area Economist, Jacques Cailloux. “Exports rose at the weakest rate since August 2005, dragging growth of total new orders down to a 15-month low. Pricing power has also been affected, with manufacturers' output prices showing the weakest monthly rise since March of last year. The other survey indicators are consistent with output growth slowing further in coming months and thus support our view that the ECB should not raise rates above 4 percent this year.”

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