The euro zone manufacturing sector grew at its fastest pace in 19 months in February, led by a robust performance in Germany and Italy, but companies continued to cut jobs, a survey showed today.
Surging output and new orders pushed the RBS/NTC Research Eurozone Manufacturing Purchasing Managers' Index one point higher to 54.5, its highest level since July 2004 and above the consensus forecast for a rise to 54.0.
On a national basis, German manufacturers put in their best performance in 19 months, whilst the Italian index hit its highest in more than 5 years. Both were boosted by external demand for capital goods, coupled with a pick-up in domestic demand.
But the euro zone employment index inched up only marginally to 49.7 from January's 49.6, staying below the 50 line between growth and contraction. Manufacturers have cut jobs in all but one of the past 57 months, the exception being last December.
Although Germany, Austria and Greece reported modest increases in staff numbers, other countries cut jobs. This was despite signs that companies are no longer quite coping with the influx of new orders, which could bode well for staffing levels in the future.
The backlogs of work index rose to its highest level since May 2004, at 53.8 from January's 53.1. Companies also dug deep into their warehouses to fulfil orders, as the stocks of finished goods index, at 47.8, contracted for an 11th month.
"Companies are clearly struggling with current workloads and in ideal circumstances would be taking on more staff now," said Chris Williamson, chief economist at NTC Research which compiles the survey of around 3,000 companies.
"But there is so much pressure to keep costs low and to boost productivity to remain competitive, especially in export markets, that while we may see some employment growth, it's going to remain subdued."
The input prices index rose to 64.8 from 63.0 and the output prices climbed to 53.4 from 51.8, both hitting 1-year highs.