Worryingly for policymakers at the European Central Bank, who are struggling to bolster growth and drive up dangerously low inflation, factory activity declined in the eurozone’s three biggest economies: Germany, France and Italy.
“The concern is the ongoing lack of any real growth in the eurozone. We are dealing with very low price pressures, and when that comes with weak growth, like in the eurozone, it raises concerns,” TD Securities head of global strategy, Richard Kelly, said.
Data vendor Markit said its final November manufacturing Purchasing Managers’ Index (PMI) for the eurozone was 50.1, its lowest reading since June 2013, despite price cutting made possible by tumbling input costs.
That is barely above the 50 mark that separates growth from contraction and, in a sign that there is little prospect of improvement in December, new orders declined for a third month.
The growth slowdown comes despite factories cutting prices at the fastest pace since mid-2013, although neither factor will likely push the ECB into loosening monetary policy further when it meets on Thursday.
Annual eurozone inflation fell to 0.3% in November, firmly in the ECB’s deflation “danger zone”, and as oil prices sank to their lowest in over five years yesterday with the industrial bellwether copper not far behind, there are few reasons to expect any meaningful pick-up.
Both US and Brent crude oil have now fallen for five straight months, the longest losing streak since the 2008 financial crisis and the rout has spread to gold and silver prices while the US dollar rose to seven-year peaks against the yen.
However, British manufacturing activity unexpectedly picked up a little speed as domestic demand offset falling exports from Europe and emerging markets.
Yesterday’s gloomy news began in Asia with China’s HSBC/Markit PMI touching a six-month trough of 50.0. The official version was scarcely better, slipping to 50.3 in November from October’s 50.8.
“This is the lowest reading since March and highlights downward pressure on China’s growth in the manufacturing sector,” Credit Agricole economist, Dariusz Kowalczyk, said.
China’s troubles were felt broadly across the region, with South Korea reporting exports to Asia’s economic powerhouse falling for the first time in three months, while its measure of manufacturing activity stayed stuck in contractionary territory.