The Eurozone economy appeared to grow at a faster rate than the UK economy in February, suggest surveys out today.The Eurozone, we are regularly told, is on the verge of collapse. With the UK set to leave, it is only a matter for time before the region falls apart under the weight of its own hubris – or so goes the narrative.
If that is so, then the latest evidence from the surveys is hard to understand.
The latest purchasing managers’ indexes tracking manufacturing in both the UK and euro area are out, and this time around, with the exception of Greece, they are good. But on these measures, at least, the UK lags behind the Netherlands, Austria, Germany, Italy and Spain. Of the countries for which we have data, only Ireland, France and beleaguered Greece did worse. In fact, the region as a whole saw readings that were close to their highest levels in six years.
Not that it was a bad showing for the UK. The latest manufacturing PMI for the UK stood at 54.6, down a mite from January’s 55.7, but well above the 50 level which is consistent with growth.
Rob Dobson, Senior Economist at IHS Markit, which compiles the survey said that “although rates of expansion in output and new business lost impetus in February, growth remained comfortably above the long run averages.”
In fact, he said that the “survey is signalling quarterly manufacturing output growth close to the 1.5 per cent mark”. It turns out that if this can be achieved, it would be one of the best performances over the past seven years.
In the euro area, however, the PMI for Holland rose to 58.3 – a 70 month high, 57.2 in Austria, 56.8 in Germany, 55 in Italy and 54.8 in Spain.
Alas in Greece the index was at 47.7, pointing to continued contraction.
Chris Williamson, Chief Business Economist at IHS Markit said: that “Companies clearly expect the good times to persist. This year has seen firms more optimistic about the future than at any time since the region’s debt crisis. Companies are reporting stronger demand in both home and export markets, with the weakened euro providing an accompanying tailwind to help drive sales.”
The indexes also point to one of the highest rates of job creation in the manufacturing sector ever recorded.
Cost pressures are rising, however. In the UK, the PMI points to input costs and output charges rising at near survey record rates.
But don’t put the jump in costs solely down to Brexit and the cheaper pound. According to the PMIs, across the euro area, input costs rose at the quickest pace since May 2011. Markit said that “these pressures filtered through to the factory gate, with average output charges rising to the greatest extent for over five-and-a-half years.”