Eurozone manufacturing remains sluggish, says latest PMI

Eurozone manufacturing activity stagnated in October as new orders flatlined and headcount fell, despite production continuing to edge higher for an eighth consecutive month, a survey showed on Monday. Pic: iStock

Eurozone manufacturing activity stagnated in October as new orders flatlined and headcount fell, despite production continuing to edge higher for an eighth consecutive month, a survey showed on Monday.

The final HCOB Eurozone Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, registered 50.0 in October, matching a preliminary estimate and up slightly from September's 49.8 but sitting exactly at the threshold separating growth from contraction.

"In the eurozone's manufacturing sector, we can at best speak of a very delicate sprout of economic recovery," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

In Ireland, manufacturing growth continued to slow in October with the month’s purchasing managers index (PMI) showing the slowest upturn in overall manufacturing conditions since the start of the year. The manufacturing PMI had a reading of 50.9 during October, down from the 51.8 recorded in September.

In the wider eurozone, output expanded marginally for the eighth straight month but showed little momentum, registering at 51.0 compared with 50.9 in September. New orders remained subdued, neither growing nor declining after over three years of near-continuous contraction.

Export orders declined for a fourth consecutive month, acting as a drag on overall demand for European goods.

The reduction in headcount accelerated slightly, extending the manufacturing sector's employment contraction to nearly two-and-a-half years. Companies reduced staffing levels despite delivery times from suppliers lengthening to the greatest extent in three years.

"Job cuts continued and even picked up a bit. This is the result of weak demand, which is forcing companies to cut costs or boost productivity," de la Rubia added.

Performance varied significantly across the region. Greece and Spain recorded the strongest improvements, with respective PMI readings of 53.5 and 52.1. In contrast, Germany and France - the bloc's largest economies - remained in contraction territory at 49.6 and 48.8 respectively.

Manufacturers continued reducing inventory levels in October, extending a prolonged period of destocking for both raw materials and finished goods.

Input costs were unchanged from September while prices charged to customers increased only marginally for the first time since April.

Enjoying a rare period of low inflation, the European Central Bank left interest rates on hold last week for the third meeting in a row and offered no hints about future moves.

Business confidence about the year ahead declined for the second consecutive month, falling below the long-term average amid persistent weak demand and economic uncertainty.

Reuters