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Eurozone productivity rises amid improved trends in Germany and Italy

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Christian Fernsby ▼ | February 7, 2020
January data highlighted back to back increases in private sector productivity across the eurozone.
European factory
Economy in Europe   Growth softened marginally in the service economy
Growth softened marginally in the service economy and manufacturers signalled stabilisation after 22 months of decline.

Topics: Euro productivity Germany Italy

Germany was the brightest spot, where aggregate workforce efficiency improved for the second straight month.

A slower contraction was recorded in Italy, while France posted a deterioration for the first time since last July.

The seasonally adjusted Eurozone Productivity PMI® – derived from IHS Markit’s national manufacturing and services PMI survey data – was up from 50.1 in December to 50.2 at the start of 2020, signalling the second successive improvement in labour market efficiency after contraction had been recorded for 17 months in a row.

That said, the latest reading was indicative of a fractional rate of expansion.

Eurozone service providers continued to signal efficiency gains, but the pace of improvement was fractional and a tick lower than noted at the end of 2019.

Goods producers noted a stabilisation in productivity, thereby ending a 22 month sequence of reduction.

Germany was the sole contributor to growth of combined eurozone productivity, with the private sector seeing a second consecutive improvement in labour efficiency.

However, the rate of increase remained marginal and below its long run average.

German manufacturers indicated a second straight rise in productivity, with the pace of reduction in employment outweighing that for production in January.

In the service economy, output per head increased for the first time in nine months, albeit fractionally.

Although workforce efficiency across Italy’s private sector continued to worsen, the deterioration eased from December and was only fractional.

The slowdown stemmed from a softer decline in the manufacturing industry and growth among service providers.

Despite being fractional, the upturn noted in the latter was only the second in the past nine months.

After increasing for five months in a row, French private sector productivity fell at the start of 2020.

The pace of job creation exceeded that seen for output expansion in January.

Goods producers in France recorded a fifteenth consecutive worsening of productivity.

However, the pace of deterioration was modest and the slowest since last October.

In the service sector, the previous five month sequence of productivity growth came to an end as the respective seasonally adjusted index dipped below the neutral 50.0 mark.

That said, the pace of reduction was fractional overall.