Euro Zone Factory Activity Remains Upbeat, But France, Greece Continue To Disappoint

A modest recovery in the euro zone’s manufacturing sector continued in October, with Markit’s Purchasing Managers’ Index, or PMI, hitting a value of 51.3, edging higher from 51.1 in September and unchanged from a preliminary estimate.

Growth accelerated in Germany, Ireland and Spain, while France and Greece registered a contraction. Ireland recorded the fastest rate of expansion in manufacturing to reach a 30-month high of 54.9, while growth hit a 28-month high in Austria.

The French PMI index dropped to a four-month low of 49.1, revised down from an earlier estimate of 49.4, while Greece dropped to a 3-month low of a 47.3 reading. Germany’s PMI was revised up to 51.7 from a preliminary estimate of 51.5, and higher than September’s 51.1 reading. A reading above 50 indicates expansion while a reading below 50 shows contraction.

“While it is in some respects disappointing that the PMI has failed to show a steeper pick-up over the last two months, the recent growth revealed by the survey indicates a marked turnaround in the health of the manufacturing economy,” Chris Williamson, chief economist at Markit, said in a statement. “While the survey was signaling a 2-3% annual rate of decline in industrial production earlier in the year, a 2-3% rate of expansion is now being indicated.”

Despite an upturn, the manufacturing sector in all the euro zone countries, with the exception of Ireland, the Netherlands and Austria, recorded job losses for the twenty-first consecutive month in October.

Deteriorating conditions in French factory activity were attributed to modest declines in aspects such as output, new orders and employment.

“One rare bright spot was a rise in export sales for the third time in the past four months, with growth the fastest since May 2011,” Jack Kennedy, senior economist at Markit, said in a statement.