It says much about the anaemic state of global demand when you realize that manufacturing output in the Eurozone has seen 23 consecutive months of growth yet unemployment is still at 11.3% - although there has been a reduction.
The slow recovery of European manufacturing is highlighted by the latest Purchasing Managers’ Index for the sector in the Eurozone which has come in at 52.2 in March for the 19 member bloc, representing the highest reading seen for 10 months. A reading above fifty shows that the sector under study is expanding whereas values below fifty point to a contraction.
Eurozone exports have benefited by the weakness of the Euro which has slipped by 12% against the Dollar over the course of the year to date. The disparity is due to a strong Dollar, buoyed by the recent performance of the US economy, the ending of the US asset purchase programme and speculation that the Federal Reserve will be raising interest rates sooner rather than later. On the other side of the balance, the Euro has come under pressure since the ECB announced its own asset purchase scheme which will see €60 billion a month injected into the Eurozone economy until September 2016, if not later. Of course, uncertainty about the viability of Greece as a member of the Euro is also generating negative sentiment towards the single currency. The weaker Euro means that exported goods are cheaper and that imported finished goods are more expensive within the bloc, giving a competitive edge to “home grown” products within the Eurozone.
Eurozone manufacturing has also been helped by reduced costs as a result in the fall of the oil price – although this particular tide floats all boats.
The best PMI figures within the Eurozone were returned by Ireland and Spain at 56.8 and 54.3 respectively – both countries needed support from the Eurozone during the Global Financial Crisis although Spain was at pains to point out that its support was not a sovereign bailout, but support to the banking sector only.
PMI values for France, Austria and Greece all showed contraction, showing that much room for improvement remains.