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News: Eurozone Manufacturing Growth Continues, Jobless Rate Steadies
12/01/09 08:25 am (EST)

(RTTNews) - Manufacturing activity in the Eurozone expanded for a second month in November, while the unemployment rate stabilized at an 11-year high in October, as the economy of sixteen nations emerged from recession in the third quarter.

The final purchasing managers' index for the Eurozone manufacturing sector rose to a 20-month high of 51.2 in November from 50.7 in October and above the flash estimate of 51, survey data released by the Markit Economics showed Tuesday. A PMI reading above 50 suggests expansion in the sector. The manufacturing PMI has now posted a reading above the neutral 50 mark for two successive months.

"November PMI data suggest that the Eurozone manufacturing recovery gained traction, albeit from a low base, with output and new orders expanding at the fastest rates since Q3 2007," Markit senior economist Rob Dobson said.

Manufacturing production increased for the fourth consecutive month in November, led by the strong performances of the intermediate and investment goods producing sectors. Growth of output was the fastest in 26 months.

Manufacturing new orders rose in November at a slightly faster pace than the earlier flash estimate. The growth of new work reached a 27-month high. The strongest gains in new business were recorded in Germany, France and the Netherlands. Spain and Greece were the only member states to report contractions.

Despite a strong euro, new export orders rose for the fourth month running in November. The latest rate of increase was the steepest since January 2008 and marginally better than the flash estimate.

Although staffing levels fell less sharply than indicated by the flash estimate, the rate of decline was still fast by the historical standards of the survey and greater than in the previous month. Rates of reduction were especially marked in Spain and Germany.

A report from Eurostat showed Tuesday that the seasonally adjusted jobless rate stood at 9.8% for a second month in October after a continuous rise in past several months. This is the highest rate since December 1998. The number of unemployed stood at 22.5 million. A year ago, the jobless rate was 7.9%. In the EU27, the unemployment rate was 9.3% versus 9.2% in September.

"The government-sponsored short-time working schemes adopted in many Eurozone countries clearly continues to have a dampening effect on unemployment," ING economist Martin van Vliet said. "Unfortunately, surveys of hiring intentions still foreshadow more job-shedding in the months ahead."

Backlogs of work increased slightly in November for the first time since March 2008, indicating that active capacity at manufacturers moved closer to current production requirements.

Average input prices rose for the second month in November, reflecting higher commodity prices and average charges fell for the thirteenth month in a row, but the pace of decline was the second-weakest during that period. Stocks of finished goods fell for the eleventh month running in November. Meanwhile, the forward-looking new orders to inventory ratio ticked higher from the earlier flash estimate, to hold steady at October's nine-and-a-half year high.

"The sector has been benefiting from a better external environment, from budgetary measures, such as car scrappage schemes and the progressively ending of the destocking process," BNP Paribas economist Clemente De Lucia said. Activity in the sector should continue to increase over the coming months, according to the economist though the survey highlights some sign of growth peaking.

A separate Markit survey showed that the seasonally adjusted Markit/BME manufacturing PMI for Germany stood at 52.4 in November, up from 51 in October, and a flash reading of 52. That was the highest reading since June 2008. Activity expanded for the second month in a row.

The Markit/CDAF French manufacturing PMI posted 54.4, down slightly from 55.6 in the previous month, but still the second-highest reading in the past three years. Manufacturing output increased for a fifth successive survey period in November.

Further, the Markit/ADACI manufacturing PMI for Italy logged 50.1 in November, up from 49.2 in October. The indicator rose above the neutral mark of 50 for the first time since February 2008.

However, the PMI for the Spanish manufacturing sector fell to 45.3 in November from 46.3 in October, indicating that business conditions deteriorated at a stronger pace during the month. The PMI has now posted below the neutral 50 mark for two years, with the latest reading the lowest since June.

Given the latest improvements in the economy, the European Central Bank is likely to hold its key interest at a record low of 1% on Thursday for a seventh consecutive month. The central bank is widely expected to start exiting stimulus measures this month. In the third quarter, the Eurozone economy emerged out of its worst recession by expanding 0.4% sequentially.