Eurozone PMI Highlights Divergent National Trends

Germany remains the strongest of the big-four euro nations as France sees below euro area average growth.

EDINBURGH, UK - Eurozone manufacturing PMI reached a four-month high in June, according to research by the Royal Bank of Scotland (RBS) and NTC Economics.
At 55.6 in June, from 55 in May, the PMI shows the strongest monthly improvement since February, due to accelerating growth rates in output and new orders.
Despite the better momentum in June, average expansion rates for production and total new orders for the second quarter 2007 were slower than 2006.
Among the big-four euro nations, Germany and Spain saw strong output growth, while France and Italy weakened. Germany recorded the fastest growth rate as France recorded the lowest.
Export order growth was sluggish in France and Italy, but slightly better in Spain. Sharp acceleration in German export orders helped solidify the country’s strength.
Staffing levels rose at the fastest rate in over six years, with Germany seeing the sharpest increase. Employment growth accelerated in Spain, but slowed down in France and Italy.
Backlogs of work continued a 24-month trend, growing at a rate that was the strongest since February.
Raw materials shortages and high energy prices pushed up average input price inflation, but the level was still well below last year’s peak.
Prices charged increased at the slowest rate since February 2006. France saw an increase in the rate of inflation. Germany and Spain saw eight-month lows, while Italy hit a 17-month low.
“The final PMI confirms the earlier message from the flash release, that the Eurozone manufacturing sectors saw a welcome acceleration of growth in June following the slowdown evident in the previous three months,” commented RBS Chief Euro Area Economist Jacques Cailloux. “Growth in the manufacturing sector has cooled since last year’s highs but remains in the region of 3 percent per annum. There are some significant divergences in national performance, however, with surging expansion in Germany—led by strong exports of investment goods—contrasting with well below euro area average growth in France, where demand for domestic consumer goods appears to have slowed sharply in recent months and export sales growth has also weakened.”
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