The final RBS/NTC Eurozone Manufacturing PMI came in at 50.7 in April, down from 52.0 in March and slightly below the earlier flash estimate of 50.8. The fall in the PMI was the largest for six months and took the index to its lowest since August 2005.
National trends among the big-four euro nations varied markedly again in April, as did production by sector, with consumer goods producers reporting a survey record decline in output.
The PMI (Purchasing Managers' Index) was particularly weak, registering the first decline in new orders since May 2005 (in line with the flash reading). New export orders fell by marginally more than indicated by the flash reading, also declining for the first time since May 2005 due to softer economic growth in key foreign markets and the strong euro.
Among the big-four euro countries, only Germany recorded an increase in new orders, though the rise was the smallest for three months. This deterioration was primarily the result of a substantial easing in growth of new export orders at German manufacturers. Spain and Italy both saw new orders fall at the steepest rates since December 2001.
In a sign of broad-based weakness of production to come in future months, new orders for consumer, intermediate and investment goods (such as plant and machinery) all fell in April, albeit only marginally in the case of investment goods. Consumer goods producers saw the sharpest monthly drop in new orders in the survey’s ten-year history, in part reflecting lower levels of new export orders.
Spain
Spain's manufacturing sector shrank at its fastest rate in more than six years in April and more hardship seems to be on its way as orders continued to dry up. Spanish economic growth is expected to halve this year from last year's rate of 3.8 percent as property sales plunge, the construction sector shrinks, loan defaults rise, and unemployment surges.
The NTC Purchasing Managers Index (PMI) showed the gloom had settled firmly over the manufacturing sector which shrank for the third month in a row, dropping from 46.4 in March to 45.2 in April, its lowest in 76 months and well below the 50-mark that separates growth and contraction.
The new orders index dropped to 42.0 from 45.3, which NTC put down to weaker demand from the building sector and foreign buyers put off by the strength of the euro. Export orders dropped at the fastest rate in almost five years.
"The continuing strength of the euro and worsening global economic conditions suggest external demand is unlikely to fill the void left by the end of the construction boom." said Nathan Carroll, an economist at NTC.
Employment slipped for the eighth month running and at the sharpest rate for three years at 47.7 as manufacturers tried to cut costs and make up for lower orders.
That might put in doubt government predictions that industry can provide new jobs for those who have been laid off from the construction sector.
"I suspect that these numbers will provide some worrying reading for anyone thinking that the manufacturing sector can absorb jobs from construction ... employment is falling for the eighth month running and the indications are that companies are going to cut back further," said Chris Williamson, chief economist at NTC. "The long term trend in employment is difficult to say ... but would we expect to be seeing job losses in industry in the INE survey in coming quarters? Yes."
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