Eurozone Manufacturing Sector Regains Momentum

The eurozone manufacturing sector regained momentum in January with faster growth in production, new orders and employment, final survey data from IHS Markit showed on Tuesday.

The manufacturing Purchasing Managers’ Index rose to a five-month high of 58.7 in January from 59.0 in December. But the final reading was below the flash 59.0.

Manufacturing output increased further in January, extending the current sequence of growth to 19 months. Demand conditions also improved with new orders rising at the fastest pace in four months.

In an effort to clear unfulfilled orders and manage rising intakes of new work, additional staff were hired by eurozone goods producers in January. The rate of job creation was the fastest since August.

The rate of input price inflation eased, to the weakest in nine months, but factory gate charges were increased to the second-fastest extent in almost 20 years of data collection.

Eurozone manufacturers appear to be weathering the Omicron storm better than prior COVID-19 waves so far, Chris Williamson, chief business economist at IHS Markit said.

However, escalating tensions surrounding Ukraine, the energy price crisis and prospect of global central bank policy tightening create additional headwinds to the outlook, Williamson noted.

Data split by euro area nation revealed that faster expansions were seen in the Netherlands, Germany and Ireland. Elsewhere, manufacturing growth in Spain was strong and unchanged from December, while slower improvements were seen for Italy and France.

Germany’s manufacturing activity improved for the first time in six months in January. The IHS Markit/BME final manufacturing PMI came in at a five-month high of 59.8, following successive readings of 57.4 in November and December. The score was below the flash 60.5.

With output and employment growing faster, France manufacturing sector logged a marginal drop in growth. The final factory PMI dropped to 55.5 in January, as initially estimated, from 55.6 in December.

Although Italy’s manufacturing sector growth slowed in January, the pace of growth was strong. The factory PMI posted 58.3, but down from 62.0 in December.

Spain’s manufacturing sector remained firmly in expansionary mode in January. The factory PMI held steady at 56.2 in January and remained above the 50.0 no-change mark for a twelfth successive month.

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