Economic Report: Eurozone Manufacturing Activity Continues to Stabilize

AICC, through its membership in the Council of Manufacturing Associations, is pleased to present the "Monday Economic Report" from the NATIONAL ASSOCIATION OF MANUFACTURERS (NAM).

By Chad Moutray, Ph.D., CBE –February 24, 2020

NAM Weekly Toplines: 

• The IHS Markit Flash Eurozone Manufacturing PMI remained challenged in February but continued to stabilize, rising to the best reading in 12 months. It was led by improvements in Germany, which has contracted in every month since December 2018, but improved to the weakest rate of decline in 13 months.
• Manufacturing activity in the United Kingdom expanded at the best rate in 10 months in February in the aftermath of Brexit, improving from neutral in January. In contrast, French manufacturers reported the first decline in activity since August, even as overall economic conditions strengthened somewhat to modest growth in February.
• In the United States, the manufacturing data provided mixed results. The IHS Markit Flash U.S. Manufacturing PMI slowed in February to the weakest rate of expansion in six months. Respondents cited “delays in deliveries following the outbreak of the coronavirus in China,” which dampened sentiment and production. Yet, manufacturers felt more upbeat in their assessments of the next six months, with the index for future output rising to a 10-month high.
• On a regional level, manufacturers in the New York and Philadelphia Federal Reserve Bank districts both reported accelerating activity in February on stronger demand and shipments data, with a positive outlook for growth over the next six months.
• New residential construction pulled back 3.6% to 1,567,000 units at the annual rate in January, but the housing market figures remained solid overall, boosted by warmer-than-normal temperatures. Multifamily activity jumped to the fastest pace since December 1986, with single-family activity easing from the best reading since June 2007 but still with more than 1 million units. Over the past 12 months, new residential construction has soared 21.4%.
• This suggests that homebuyers continue to respond positively to lower mortgage rates, with the overall housing market bouncing back after being in the doldrums over much of the past few years. Homebuilder optimism also reflects that positivity, and housing permits rose to an annualized 1,551,000 units in January, a pace not seen since March 2007.

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• Producer prices for final demand goods and services jumped 0.5% in January, the fastest monthly gain since October 2018 and boosted by higher costs for trade services. At the same time, producer prices for final demand goods edged up 0.1% in January, pulled lower by a 0.7% drop in energy costs for the month.
• Core inflation for goods, which excludes food and energy, increased 0.3% in January, the strongest reading in one year. However, core producer prices remain low, with 1.5% growth year-over-year, below the Federal Reserve’s stated goal of 2%.

The U.S. dollar has risen, and yields have fallen on continued coronavirus outbreak concerns. For instance, yields on 10-year Treasury bonds fell to 1.47% on Friday, down from 1.91% at the end of 2019 and the lowest since Sept. 4.