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Eurozone productivity stagnates during April
- Output per head falls at manufacturers; broadly stagnates at service providers
- Back-to-back drop in total productivity across Germany
- France posts stronger improvement in workforce efficiency than Italy
Total productivity in the euro area was broadly unchanged in April, thereby ending a 58-month period of uninterrupted growth. Weaknesses were evident in both the manufacturing and service sectors, with the former displaying a back-to-back fall and the latter showing stagnation. Germany was the worst-performing nation, where the extent of the efficiency loss was the most marked in over five-and-a-half years. Easing to an 18-month low at the start of the second quarter, growth in Italy was outstripped by that recorded in France (three-month high).
At 49.9 in April, the seasonally adjusted Eurozone Productivity PMI® - derived from IHS Markit's national manufacturing and services PMI survey data - registered below the critical 50.0 threshold for the first time in almost five years. Down from 50.8 in March, the latest reading was indicative of generally unchanged output per worker across the currency bloc. Worsening performances were noticed in both the manufacturing and service sectors. Goods producers saw a quicker decline in output per head than in March, while service providers recorded a lack of productivity progress.
After falling in March for the first time since May 2013, productivity across Germany remained in contraction territory at the start of the second quarter. Although modest overall, the rate of reduction was the quickest seen in over five-and-a-half years. The downturn was widespread across the manufacturing and service sectors, with the sharper decline registered in the latter.
In France, a solid service sector performance acted to offset subdued workforce efficiency among goods producers. The improvement in productivity in the service economy was the strongest in three months and in line with the long-run series trend. At the same time, output per head in the manufacturing industry was unchanged, ending a 30-month period of ongoing growth. Across, the private sector as whole, efficiency gains showed a slightly quicker rise than noted in March, with France the brightest spot on a national basis.
Italy saw a considerable loss of growth momentum, with April highlighting a sustained slowdown in productivity expansion. The upturn was, in fact, the weakest in the current one-and-a-half year sequence of increase and only marginal. Manufacturers signalled the slowest rise in output per worker since December 2016, while broad stagnation was recorded in the service sector.
Pollyanna De Lima, Principal Economist, IHS Markit
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
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The data flow coming from the US in the coming months will be key to guiding FOMC policy, see our chart below... https://t.co/7PtG9KOx9u