Europe April Manufacturing Summary: France’s Loss Is Germany’s Gain

There is a reason why while Germany has been delighted to keep the Euro as its currency, in the process keeping a substantial discount to where the Deutsche Mark would be trading if it weren’t for the implicit FX subsidies by ther Eurozone members, France has been increasingly more panicked and vocal about the soaring EUR. That reason became apparent this morning when Markit reported that France PMI for April both declined from the March print of 52.1, and missed expectations of 51.9, printing at 50.9. Same thing for the Services PMI which at 50.3, both missed expectations of 51.3, and dropped from 51.5.

Markit summarized the French move as follows:

  • Flash France Composite Output Index falls to 50.5 (51.8 in March), 2-month low
  • Flash France Services Activity Index slips to 50.3 (51.5 in March), 2-month low
  • Flash France Manufacturing Output Index drops to 51.6 (53.3 in March), 2-month low
  • Flash France Manufacturing PMI falls to 50.9 (52.1 in March), 2-month low


French private sector output rose for a second consecutive month in April, although the rate of expansion eased to a marginal pace. This was signalled by the Markit Flash France Composite Output Index, based on around 85% of normal monthly survey replies, posting 50.5, down from 51.8 in March.


Weaker rates of output growth were recorded in both the service and manufacturing sectors during April. Services activity rose only fractionally, while manufacturers indicated a modest increase in production.


Latest data pointed to a stagnation of new business during April, following a modest rise in the previous month. A slight reduction in new work at service providers offset a moderate rise at manufacturers. Anecdotal evidence suggested that a number of clients were operating with tight budget constraints, while others were adopting a wait-and-see attitude before committing to new projects. New export orders at manufacturers increased modestly, albeit at a slightly slower pace than in March.

Jack Kennedy, Senior Economist at Markit, which compiles the Flash France PMI ® survey, said: “The nascent recovery in French private sector output lost momentum in April. A weaker rise in activity reflected stalling new business, while staffing levels were cut at a sharper rate. A general hesitancy among clients was reported – until we see a decisive shift in confidence, the business climate looks set to remain frail.”

France’s loss however was Germany’s gain, which beat expetations across the board:

  • Flash Germany Composite Output Index at 56.3 (54.3 in March), 2-month high, Expected at 54.0
  • Flash Germany Services Activity Index at 55.0 (53.0 in March), 2-month high, Expected at 53.3
  • Flash Germany Manufacturing PMI at 54.2 (53.7 in March), 2-month high, Expected at 53.8
  • Flash Germany Manufacturing Output Index at 58.8 (57.0 in March), 3-month high

The detailed breakdown:

  • German private sector companies reported solid activity growth at the start of the second quarter, as highlighted by the Markit Flash Germany Composite Output Index rising from 54.3 in March to 56.3. The latest reading was the second-highest in nearly three years and stretched the current period of growth to 12 months. Survey participants commented that an improved economic environment and increased order intakes were the main contributors to the latest expansion.
  • The acceleration in output growth was broad-based by sector with both manufacturers and service providers signalling sharper expansions. Goods producers reported the quickest rise in output for three months (and the second sharpest since mid-2010), while growth in the service sector reached a two-month high.
  • Growth in new business also picked up in April to an above average pace amid reports of increased domestic and foreign demand plus a general improvement in economic conditions. Despite easing to a five-month low, new work placed at goods producers increased at a marked pace and service providers reported the fastest rise in order intakes since November last year.
  • In the goods producing sector, new export work continued to increase, with companies mentioningAsia, Europe and the US as sources of growth. The net rise was slightly sharper than in March. Increased business requirements was one of the main reasons encouraging German private sector companies to hire additional workers during April.
  • The rate of job creation accelerated since the previous month and was down only marginally from February’s 25-month high. Concurrently, backlogs of work were broadly unchanged, having fallen in March.

The verdict: Oliver Kolodseike, Economist at Markit and author  of the Flash Germany PMI said: “April’s flash PMI results signalled a continuation of the strong recovery in Germany’s private sector, suggesting that the economy is set to build on the foundation of last quarter’s solid growth. “A combination of increased activity, rising new orders and further employment growth across both themanufacturing and service sectors suggest companies will remain in expansion mode during the coming months. “Price data meanwhile point to an increasing risk of deflationary pressures in the eurozone’s largest economy, with some companies commenting that successful price negotiations, increased competition among suppliers and lower raw material prices had pushed input costs down. Official data showed that inflation in Germany fell to 1.0% in March, the lowest level since mid-2010.”

Bottom line, while France’s loss was Germany’s gain, Eurozone Composite PMI of 54.0 picked up from last month’s 53.1, above the 53.0 expected, with the final manufacturing print of 53.3, beating both the estaimte and last month’s 53.0, and the employment component specifically rising to the highest since August 2011.