Manufacturing gaining momentum in Eurozone

Manufacturing in Europe

Manufacturing in Europe

For the first time in December, manufacturing have picked up in the entire European Union, including the so-called ‘peripheral’ states. Fears of sovereign debt crisis have apparently pushed to the background if recent key economic indicators are to be believed.

The Eurozone Purchasing Manager’s Index (PMI), an indicator of manufacturing activity conducted by market survey consulting firm ‘Markit’, reported that in December the index rose to 57.1 from 55.3 in November. The growth has beaten analysts’ expectation of 0.2 points. A reading above 50 indicates growth in manufacturing.

The ‘peripheral’ countries of Spain, Portugal. Ireland and Greece have recorded positive growth after months of depressing news. The looming sovereign debt crisis that weighed on the sentiments of the bond market seems to be easing. Though Germany remains at the forefront of the recovery, other states are also slowly getting back on their feet.

Chris Williamson of Markit said: “Germany remained the star performer, seeing near-record growth …. However, welcome signs of recoveries were also evident in the periphery, where export sales helped boost output growth in all cases except Greece, where the rate of decline at least moderated”. This also diminishes the fear of a ‘two speed Europe’ theory, when the Germany led block surges ahead while the so-called ‘PIIGS’ countries struggle with their financial woes.

Another important development is the improvement in the job market. Eurozone has recorded a jobless rate of 10 percent since spring. The PMI survey shows the intention of hiring by businesses is the highest in more than a decade.

However consumer sentiments still remains low, indicating shoppers are still wary of the economic environment. Unless consumer spending shows improvement in Europe, particularly in Germany – economic recovery will not accelerate; fear economists.

The PMI has remained over the 50 mark for the last 15 months.

“It provides further evidence that, contrary to the tensions in the debt markets, the business sector has continued to exhibit economic improvement”, said Julian Callow of Barclays Capital.

The European recovery follows the trend in the US and Asia. US manufacturing recorded growth for 17 months in a row.

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