The final reading of euro zone manufacturing PMI for October was confirmed at 51.3, up from 51.1 in September and in line with expectations. The euro zone manufacturing PMI is now only marginally below its 2-year high reached in August. Looking at the national data, manufacturing growth picked up in Germany, Austria, Spain and Ireland in October, but slowed slightly in Italy. Only the Greek and French manufacturing PMI’s remained in contraction territory in October.
The gain in the headline euro zone manufacturing PMI was driven by increasing output, while other sub-indices recorded limited slowdowns. New orders continued to grow in October, although at a slightly weaker pace, while employment fell at a marginally faster pace. Input prices rose at their sharpest pace since December last year. Selling prices increased only marginally, suggesting that pricing power remains very modest. After a strong recovery since April, the euro zone manufacturing PMI stayed broadly unchanged in the previous two months, suggesting the recovery has stalled.
Although output and orders are growing slightly, the growth rate is insufficient to create new jobs and therefore it is important for the recovery to gain strength in the coming months. Despite the uninspiring headline figure, the details show that the recovery is broad-based, which is an encouraging sign as reforms in Spain and Italy are starting to bear fruit.