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Portfolio > Economy & Markets

Eurozone Manufacturing Sector Falls Faster

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The manufacturing sector in the eurozone shrank more quickly than thought in August, even though factories had cut prices in an attempt to boost demand. But slowing economies in the region, weighed down particularly by Spain and Italy, took their toll even on France and Germany.

Reuters reported Monday that an earlier flash reading from Markit Economics of the manufacturing sector PMI stood at 45.3; however, the final results released Monday revealed that the sector instead hit 45.1. That’s above a three-year low hit in July of 44.0, but it’s still the thirteenth month in a row that the index has lingered below 50, the dividing line between economic expansion and contraction.

Friday figures had shown that inflation grew more than expected as well, despite price cuts by factories. Still, the inflation numbers may affect the ECB’s actions later in the week regarding interest rates.

“Downturns in output and new orders ease slightly, but remain widespread across nations,” the report said in part. “Business conditions deteriorated in the vast majority of the national manufacturing sectors covered by the survey.”

Domestic markets failed to provide enough demand to fuel manufacturing, and that came on top of weaker global demand. Germany and Greece were strange bedfellows in recording the sharpest declines in new export business. Employment fell as well, for the seventh straight month, with Spain, Italy and Greece reporting the greatest job losses.

“The final reading of the August PMI confirms that the eurozone manufacturing sector remains firmly in contraction territory,” said Rob Dobson in a statement. Dobson, senior economist at Markit, continued, “…the sector is on course to act as a drag on gross domestic product in the third quarter. The national picture remains one of widespread contraction … larger nations like France and Germany remain in reverse gear. The situation in Italy is also becoming more of a cause for concern.”


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