Manufacturing expansion steps up in Greece and the eurozone

Greece’s manufacturing expansion accelerated last month as March 7 general elections ended political uncertainty and fueled new orders, a monthly survey showed yesterday. The Greek Purchasing Managers’ Index (PMI), based on a survey of around 300 companies, rose to 53.8 in March from 52.5 in February, above the 50 line that divides growth from contraction. «Business conditions in the Greek manufacturing economy improved for the third month running in March,» NTC Research, which compiled the survey, said. «The seasonally adjusted PMI suggested that the pace of improvement was more marked than the previous month,» it added. It said new orders expanded for the third consecutive month in March, helped by good weather and the end of campaigning in the runup to the elections that brought conservatives to power after 11 years of Socialist rule. Employment grew at a more marked rate than in the previous month as companies stepped up production, the survey showed. But input price inflation continued to be a problem, in part due to the recent strengthening of the dollar against the euro. In the whole of the eurozone, Reuters’s PMI rose to 53.3 from 52.5 in February, above market expectations. Eurozone manufacturers have put in their best performance in over three years, keeping open the chance of an official interest rate cut in the next few months. The rise wrong-footed economists who had predicted a fall to 52.3. This pushed the index – compiled after the Madrid train bombings – to its highest level since December 2000 and kept it above 50 for the seventh straight month. «Fears that the recovery might stall – notably the recovery of manufacturing – are dispelled by this number for the time being,» said Adolf Rosenstock at Nomura International. But the PMI remains well below the 58-60 range seen in the boom time of early 2000, suggesting that recovery is slow. «I think the survey opens the gates to a cut in (European Central Bank) rates in May,» said Chris Williamson, chief economist at NTC Research. The survey of 3,000 firms was carried out after the March 11 bombings, which killed 191 people and are widely believed to be Al Qaeda’s first major attack in the West since the September 11 2001 strikes against the United States. But NTC said the index was little affected by the events, although the rate of growth slowed in Spain itself. The input prices index jumped to 65.3 – its highest reading since November 2000 – from 59.4 the previous month. «We’re seeing more price pressures from inputs and that probably reflects rising oil and commodity prices and also the recent drop in the euro,» said Elwin de Groot at Fortis Bank in Amsterdam. The strength of the euro has long been a worry for manufacturers who need to keep their goods competitively priced in foreign markets. The single currency has retreated from its February peak of above $1.29, but at current levels of around $1.22 remains some 40 percent higher than two years ago. The possibility of another euro rally is one of the factors deterring eurozone manufacturers from taking on more staff. The employment index for the bloc edged up to 48.7 in March but stayed firmly in contraction territory for the 34th month. (Reuters)

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