Euro Zone Manufacturing Activity Remains in Deep Downturn, HCOB Reports
Manufacturing activity in the euro zone continued to decline significantly in September, with demand shrinking at a pace rarely seen since 1997, according to the latest report from HCOB. The final euro zone manufacturing Purchasing Managers’ Index (PMI) dipped slightly to 43.4 from August’s 43.5, indicating a sustained downturn in the sector.
The output index, which measures production in the manufacturing sector, fell to 43.1 from 43.4, pointing towards a contraction in activity. It suggests that the recession in manufacturing likely persisted throughout the third quarter.
Notably, France and Germany, the two largest economies in the euro zone, experienced significant declines in their PMIs. However, Spain and Italy fared slightly better, showing some resilience amidst the broader downturn.
Although there was a slight uptick in the new orders index, rising to 39.2 from 39.0, it remained below the breakeven mark. This indicates that the sector is still grappling with weak demand and struggling to generate new business.
Another notable aspect of the report is the decreasing prices charged by factories, which fell at the fastest rate since the 2008/2009 Great Recession. This trend may be welcomed by the European Central Bank (ECB), which has long been struggling to reach its inflation target. The falling prices could signal some relief for consumers, but it also raises concerns about the overall health of the economy.
In light of these developments, economists predict that the ECB is likely to maintain interest rates at their current levels until at least July of next year. With the manufacturing sector continuing to face headwinds, the central bank will likely focus on supporting the broader economy and boosting inflation, even as it attempts to navigate ongoing uncertainties, such as Brexit and trade disputes.
As the euro zone grapples with a protracted downturn in manufacturing, policymakers and market participants will closely monitor future manufacturing data releases to gauge the health of the sector and any potential implications for the wider economy.
