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Eurozone Manufacturing Growth Expands Despite Weakness in Greece

Manufacturing in the Eurozone is showing slow signs of growth, but the sector’s performance in July proved better than analysts expected considering the current debt crisis in Greece.

Research group Markit’s manufacturing purchasing managers’ index (PMI) showed a flash reading of 52.4 for the region in July, slightly higher than the expected 52.2, though still down from June’s 24-month high of 52.5. Any reading upwards of 50 signals growth, and according to Markit, the Eurozone’s PMI has been in expansion territory since July 2013.

“The eurozone manufacturing economy showed encouraging resilience in the face of the Greek debt crisis in July. The PMI held close to its June level, which had been the highest for over a year, coming in ahead of the earlier flash estimate largely on the back of stronger than previously recorded growth in Germany,” Markit’s chief economist Chris Williamson said.

Output in the month grew, spurred by increased new business from domestic and export clients, and cost pressures remained on the upside.

Input prices increased for the fifth straight month and manufacturers blamed the weakened euro for the uptick.

As Greece battles its debt crisis, its own PMI coming in at a historically-low 30.2, analysts expressed surprise that the country’s conditions didn’t weigh more heavily on the region’s manufacturing economy.

“Despite holding up well on prior months, the overall rate of growth in the region as a whole remains only modest, pointing to industrial production growing at an annualized rate of around 2 percent,” Williamson said. “France slipped back into contraction – the only country besides Greece to see worsening business conditions in July – and lackluster growth in Germany continues to act as a brake on the overall region.”

Italy and the Netherlands recorded the strongest rates of growth, the former charting a 51-month high of 55.3, the latter coming in at 56. Spain also saw solid growth, its PMI 53.6, though its rate of expansion has continued to cool this year.

“Policymakers will be reassured by the robust growth rates seen in these countries and the resilience of the manufacturing sector as a whole, especially as growth is likely to pick up again now that Greece has jumped its latest hurdle in the ongoing debt crisis,” Williamson noted.