Eurozone manufacturing activity expanded slightly slower than first thought last month as further discounts at the factory gate failed to drive up new orders, a survey showed.
A second month of price cutting, alongside only tepid expansion in Germany — the eurozone’s growth engine — and contractions in France and Italy, will be disconcerting for the European Central Bank as it battles to prevent deflation. Economic growth stalled in the second quarter. With inflation at just 0.4% in October, the ECB is facing pressure to introduce more stimulus.
Markit’s final October manufacturing Purchasing Managers’ Index was 50.6, beating September’s 50.3 but shy of an earlier flash estimate of 50.7. October marked the 16th month the index has been above the 50 line that separates growth from contraction.
An index measuring output, which feeds into a composite PMI due tomorrow, that is seen as a good indicator of growth, rose to 51.5 from September’s 51, although that too was lower than the flash reading, which was 51.9.
“The performance of eurozone manufacturing remained broadly flat at the start of the final quarter,” said Rob Dobson, senior economist at Markit. “Manufacturing is therefore unlikely to provide any meaningful boost to the currency union’s anaemic GDP growth.”
The latest PMI survey suggested this month will probably not be much better as orders fell, backlogs were run down and stocks of finished goods built up. The ‘new orders’ sub-index was 49.5, barely above the flash and September reading of 49.3.
“Perhaps most worrying is the trend in new orders, a key bellwether of future output growth, which declined for the second month running,” Mr Dobson said.
“It is hard to see any significant near-term boost to performance.”
Meanwhile, British manufacturing activity expanded at the fastest rate in three months in October but weak demand from the eurozone sent UK export orders tumbling at the fastest pace since January 2013.
The Markit/CIPS UK Manufacturing Purchasing Managers’ Index rose to 53.2 from 51.5 to touch its highest level since July, confounding expectations for a reading of 51.2 in a Reuters poll of economists.
Growth in new orders rose from September’s 17-month low to its highest since July thanks to increased demand in the domestic market. But policymakers may be perturbed to see new export orders falling at the fastest pace in 21 months. Minutes from the Bank of England last month showed most of its rate setters were concerned about the eurozone economy.
Nonetheless, PMI compiler Markit said the survey augured well for British economic growth in the last three months of this year.