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.   

Steady Economic Growth in the Eurozone Led by the "Big Two"

According to the latest data made available by IHS Markit, the eurozone continues to grow at a record pace. The final reading of the IHS Markit Eurozone PMI Composite Output Index for May 2017 remained at 56.8, unchanged from April's final reading. 

Output expansion in the zone was bolstered by the strong growth of new business while high levels of new orders spurred faster job creation, leading to a marked rise in employment. The manufacturing sector led the overall expansion with goods production rising at a rapid pace. 

This steady rate of growth is led by the "big two" nations, France and Germany. In Germany, growth was attributed to an increase in manufacturing production while in France, growth came as a result of a strong performance in the service sector. 

The IHS Markit Eurozone PMI Services Business Activity Index came in at 56.3, a slight decrease from 56.4 in April. According to the release, all "big four" economies (including France, Germany, Spain, and Italy) saw an increase in output, with the expansion of eurozone services business activity sparked by an increase in new orders. This increase also led to an increase in job creation and a corresponding increase in staffing levels. 

In conclusion, Chris Williamson, Chief Business Economist at IHS Markit, stated, "The final PMI readings add to mounting evidence that the eurozone is enjoying a strong second quarter, consistent with GDP rising at a 0.7% rate...The outlook for the eurozone economy therefore seem to be tilting to the upside and it seems likely that we'll start to see many forecasters' expectations for 2017 growth revised higher". 

Final reports on IHS Markit PMI readings for France and Germany in May 2017 are also available.