The euro area manufacturing sector continued to expand at the start of the year, albeit at a slower pace as new lockdown measures and supply shortages posed challenges to producers, final data from IHS Markit showed Monday.
The final manufacturing Purchasing Managers’ Index dropped to 54.8 in January from 55.2 in December. The flash reading was 54.7.
However, the sector expanded for the seventh straight month and January’s figure was amongst the highest seen over the past two-and-a-half years.
Production as well as new orders continued to grow in January, but the pace of expansion weakened since December. On the jobs front, companies on average cut their staffing levels, albeit at the weakest pace since June 2019.
With supply-side shortages intensifying, prices paid for inputs increased markedly. Although firms sought to pass on these higher costs on to clients, the overall rate of inflation was moderate and noticeably weaker than input costs.
Finally, looking ahead to the next 12 months, confidence improved to a three-year high in January largely on hopes that vaccine developments in the coming months.
The best manufacturing growth was seen in those countries with strong export bases, the Netherlands and Germany. Italy also turned in its best performance for nearly three years. Spain was the only country to record a contraction, slipping to the bottom of the rankings.
With further gains in output and new orders, the upturn in the German manufacturing sector continued in January. The final manufacturing PMI declined to 57.1 from 58.3 in December. This was slightly above the flash 57.0.
Amid fresh increase in new orders and a slight reduction in output, the French manufacturing sector grew at a slightly faster pace in January. The factory PMI rose moderately to 51.6 from 51.1 in December. The flash score was 51.5.
Italy’s headline PMI reached its highest since March 2018 amid sustained upturn in output. The factory PMI advanced unexpectedly to 55.1 from 52.8 in December. Economists had forecast the reading to fall to 52.4.
Meanwhile, Spain’s manufacturing PMI declined more-than-expected to 49.3 from 51.0 in December. The expected level was 50.9.