Manufacturing sector beginning to show signs of revival?

Manufacturing sector beginning to show signs of revival?

	Published : Tue, 05 Jul 2005 03:05 By : Cedric Benson Print this Story

The Euro zone manufacturing purchasing managers' index (PMI) has registered a rise for the first time in five months. This index is a closely watched parameter in the industry.

NTC research, the company that compiles the survey, said that the PMI index rose from 48.7 in May to 49.9 in June. "New export orders increased at the fastest rate for four months, having contracted in May, due largely to the recent depreciation of the euro," it said. Although the index remains below 50, NTC was inclined to believe that the decline has been stemmed.

A score of above 50 means that the markets are in healthy condition, while any score below 50 indicates that there is deterioration. Further good news for the manufacturing sector came in the form of a slight pick-up in the GermanIfo business climate index and European Commission sentiment indices.

The NTC research pointed out that "Of the big four euro nations, only Spain failed to see an increase in new export sales. Germany saw the strongest growth."

According to Ralph Solveen, an economist at the Commerzbank in Frankfurt, PMI data was a pointer towards the fact that things are looking up in the manufacturing sector and would gain momentum in the second half of the year, "But oil prices are still a risk for this scenario," he cautioned.

The positive vibes of these indices are likely to prompt the European Central Bank to leave interest rates unchanged at 2 per cent, when the Bank reviews the rates next week. But analysts say that in case the expected rise does not occur, the ECB will have to mow down the interest rates.

Meanwhile, Natalie Dempster, the European economist at Royal Bank of Scotland said that since the domestic demand was weak, any rise in the sector would be a modest one, "This week's data support the ECB's view that the current soft patch will prove transitory and should quell any remaining expectations of an interest rate cut at Thursday's meeting," she said.