Manufacturing in the eurozone – a key component of the bloc’s economy – is getting ever closer to “stagnation” warned a key research group Wednesday as it released a downward revision for new orders in September.
The new figures put the month’s purchasing managers index (PMI) for the currency bloc’s manufacturing industry at 50.3, down from last week’s preliminary estimate of 50.5. Both mark a 14-month low for the PMI, which stood at 50.7 in August. It is also the first time the index has dropped in more than a year.
The downward revision underlined the weak state of manufacturing across the 18-member eurozone and left the monthly PMI only marginally above the critical 50-point threshold. A reading below 50 indicates a contraction in business activity.
“September’s eurozone PMI makes for gloomy reading,” said Chris Williamson, chief economist at London-based research group Markit, which compiles the PMI data.
“The euro area’s manufacturing economy has lost the growth momentum seen earlier in the year, lurching closer to stagnation,” he said.
The index is likely to make for particularly grim reading for the 24 members of the European Central Bank’s governing council as they prepare to meet in the southern Italian city of Naples on Thursday to consider their next moves as they try to spur growth in the struggling eurozone economy.
Based on a survey of about 3,000 companies across the eurozone, the PMI for the manufacturing sector adds to the steady stream of downbeat data that have emerged from the currency bloc’s, despite the ECB recent efforts to turn around the region’s economic fortunes.
This includes cutting interest rates to historic lows and boosting liquidity in the region’s financial system.
Equally worrying for the ECB in its battle to head off the threat of deflation, the PMI showed prices declining.
“Companies are also cutting prices at the expense of profit margins as they strive to boost sales,” said Williamson.
“In a sign of spreading deflationary pressures, prices fell in all countries surveyed for the first time in over a year,” he said.
Markit also warned that the impetus provided by foreign demand continued to wane in September, with the eurozone manufacturers’ export business rising at its slowest pace since July 2013.
“Ongoing market and geopolitical uncertainties also played a role,” the group said pointing to the risks of an economic fallout from the Ukraine crisis and international sanctions against Russia.
Leading the fall in the PMI was a drop in the index for Germany, which slipped to a 15-month reading of just below 50 in September. This compared with last week’s preliminary estimate of 50.3 for Germany.
Last month’s decline in Germany signalled stagnation in the manufacturing sector of the region’s biggest economy.
The indices for France, Austria and Greece also came in below the 50-point mark.
The September PMI for the overall eurozone was propped up by expansion in the manufacturing sectors of Italy, Ireland, Spain and the Netherlands.
GNA
