Eurozone manufacturing activity continued to face a significant and widespread downturn in the past month. The latest survey, released on Monday, indicates that demand has been declining at a rate rarely seen since data collection began in 1997. The final eurozone manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, remained at a low 43.4 in September, almost unchanged from August’s 43.5 and aligning with the preliminary estimate. A PMI reading below 50 signifies a contraction in economic activity.
The output index, considered a reliable indicator of economic well-being, decreased from 43.4 to 43.1. This suggests that manufacturing has been in a recession throughout the entire third quarter. Chief economist Cyrus de la Rubia of Hamburg Commercial Bank noted that France and Germany are at the forefront of this decline in the September PMIs, while Spain and Italy have been somewhat less affected.
While the new orders index in manufacturing increased slightly from 39.0 in August to 39.2 last month, it still stayed below the point indicating economic stability. This drop in demand occurred even though factory prices declined at their fastest rate since the Great Recession in 2008/2009.
Policymakers at the European Central Bank, who have been struggling to achieve their inflation target, might view this news of falling prices with some approval. They increased their main interest rate for the tenth consecutive time last month, but it’s probable that they have completed this cycle and will maintain the rate at its current level until at least July of the coming year.
(Source: Jonathan Cable | Hugh Lawson | Reuters)
