German Manufacturing Conditions Continue to Improve

According to June PMI data from BME and IHS Markit, the German manufacturing sector is continuing to grow at the strongest rate in over six years. The PMI rose to 59.6 up from 59.5 in May, reaching a 74 month high.

The rising index reflected a large increase in new orders as well as a lengthening in supplier delivery times. German manufacturers experienced the fastest growth in new orders since March 2011, marking the sixth acceleration in seven months. Purchasing activity also rose sharply in June, placing higher demands on suppliers and leading to the greatest lengthening of delivery times since April 2011.

Average input costs continued to increase in June as a result of high prices for raw materials. However, while output inflation quickened to the second fastest rate since July 2011, the total inflation rate continued to decline to a 7 month low.

In total, the report highlights the current strength of the German manufacturing sector and suggests that manufacturing will continue to act as a positive force in second quarter German GDP.   

Industrial Production Up by 0.5% in the Euro Area

The latest data release from Eurostat, shows that seasonally adjusted industrial production has risen 0.5% in the euro zone between April and May 2017. The annual rate has risen by 1.4% in both the euro area and the EU28. 

Source: Eurostat

This  is largely due to a 4.7% increase in the production of energy, with a 0.6% rise in the production of durable consumer goods, a 0.2% rise in the production of non-durable consumer goods and a 0.1% rise in the production of intermediate goods making up for a 0.7% decrease in the production of capital goods. 

The 0.5% total increase was spurred by a 1% country-level increase in Germany, covering smaller decreases in France (down 0.6%), Italy (down 0.4%) and Spain (down 0.1%). Although, among member states for which data are available, the highest country-level increases were reported in Ireland (+7.7%), Malta (+2.9%), and Portugal (+2.0%). The highest decrease was recorded in Slovakia (-10.9%), 

In total, aggregate euro zone industrial production is increasing and the goods sector is predicted to experience a stable second quarter.  

Solid Growth Reported in the Eurozone Retail Sector for May 2017

Eurozone retailers recorded an increase in like-for-like sales in May according to the latest IHS Markit Eurozone Retail PMI report. While positive overall, the data highlighted a country level discrepancy: encouragingly high levels of growth in Germany and France counterbalanced a continuing decline in retail sales in Italy.

The IHS Markit Eurozone Retail PMI (measuring month-on-month changes in like-for-like retail sales in France, Germany, and Italy) was measured at 52.0. Decreasing from 52.7 in April, the reading points to a solid though slightly weaker rise in sales for the month.

Conversely, sales were down on an annual basis and the data showcased across the board under performance by retailers. All three countries reported gaps between forecast and actual sales with the highest discrepancy recorded in Italy.  

Gross margins fell sharply as retailers were faced with a rise in average purchasing costs. Input price inflation was reported in all three economies, most markedly in Germany.

High levels of purchase activity were also reported, catalyzed by high sales volumes and contributing to a continuing increase in stocks of goods for resale.

Finally, the data showed a rise in retail sector employment, continuing a trend which began in November 2015.

Alex Gill of IHS Markit concludes, “Overall the data paint a positive picture of the euro area retail sector. However, a sharp fall in gross margins suggests the business climate remains challenging”.