Home Forex Market News Eurozone manufacturing at 13-month low

Eurozone manufacturing at 13-month low

Manufacturing growth in the eurozone slowed to a 13-month low in August, according to a closely-watched survey.

The final Markit’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) dipped to 50.7 in August, down from 51.8 in July. A figure above 50 indicates expansion.

New orders dwindled and factories suffered amid rising tensions between the EU and Russia over Ukraine.

The figures come ahead of the European Central Bank (ECB) meeting on Thursday.

Markets will be looking for a clear plan from the bank to deal with a stalled eurozone recovery, as well as the threat of deflation with inflation standing at just 0.3%.

There is speculation that ECB boss Mario Draghi could offer further indications later this week that he is considering a quantitative easing scheme for the eurozone, similar to those taken by the UK and US during the financial crisis.

German woes

“Although some growth is better than no growth at all, the braking effect of rising economic and geopolitical uncertainties on manufacturers is becoming more visible,” said Rob Dobson, senior economist at Markit.

The factory PMI for Germany, Russia’s biggest trade partner in the EU, fell to an 11-month low of 51.4.

Meanwhile, in the bloc’s second-largest economy, France, the PMI fell to 46.9.

“France remains a real concern, as does Italy’s descent from solid expansion to stagnation. Signs that growth impetus waned in the key industrial engine of Germany, and in Spain and the Netherlands too, is also less than reassuring,” Mr Dobson said.

“The slowdown in industry is likely to add further fuel to the fire for analysts expecting additional monetary or fiscal stimulus to be implemented.”

One positive note was from the Republic of Ireland, which saw its PMI grow to 57.3, its highest level since the end of 1999.

‘Heightened uncertainty’

Howard Archer, chief economist at IHS Global Insight, said: “The best that can be said for the August eurozone manufacturing purchasing managers’ survey is that it indicates that the sector is still growing.”

He added: “Eurozone manufacturers are clearly finding life very difficult at the moment as current heightened geopolitical tensions – particularly related to Russia/Ukraine – add uncertainty to still challenging conditions in many countries.

“This heightened uncertainty has clearly hit business – especially, and consumer confidence, and it is likely causing some orders to be delayed or even cancelled, particularly big-ticket orders.”

He said it was looking “ever more likely” that the ECB would ultimately have to undertake some form of QE, “although we suspect that it will be limited”.

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