Eurozone manufacturing growth slumps to 30-month low

Niall Swan

23-Nov-2018

LONDON (ICIS)–Growth in the eurozone’s manufacturing sectors hit a 30-month low in November, according to a flash purchasing managers’ index (PMI) from IHS Markit on Friday.

According to a flash reading, based on 85% of usual monthly replies, the eurozone manufacturing PMI fell to 51.5 points in November, the lowest level seen since May 2016 and down from 52.0 points in October.

A reading above 50.0 signifies growth, while anything below that level points at a contraction.

Manufacturers’ survey responses pointed towards subdued global demand, rising political and economic uncertainty, trade wars and especially sluggish car sales as the drivers behind the slower growth.

The manufacturing sector also posted a decrease in new orders for the second month running and the sharpest fall in work-in-hand since January 2015, while employment growth stood at a 26-month low.

“Manufacturing remains the main area of weakness, linked in part to having been hit hard once again by deteriorating exports,” said IHS Markit’s chief economist Chris Williamson.

“The slowdown is also being temporarily exacerbated by persistent disappointing car sales.

“However, November also brought further signs that the manufacturing-led slowdown is spilling over to services, as consumer and corporate demand was often reported to have weakened in the face of headwinds such as rising political uncertainty, tighter financial conditions and higher prices.”

Manufacturing output growth, meanwhile, fell to a 65-month low of 50.4 points. This index is based on whether purchasing managers believe the level of production at their company is higher, the same or lower than one month ago.

Elsewhere, the overall flash composite PMI for the eurozone was 52.4 points, a 47-month low, down from 53.1 in October.

Germany was a key area of concern, with business activity growth slowing to a near four-year low, while manufacturing output remained almost stagnant, its weakest performance since April 2013.

“As such, the survey data suggest that the weakness of GDP in the third quarter may not have been a blip, and that the underlying trend is one of slower economic growth,” said Williamson.

“The PMI readings so far in the fourth quarter are indicative of 0.3% GDP growth, with forward-looking indicators such as new orders and future expectations remaining worryingly subdued.”

Pictured: Audi’s assembly line in Ingolstadt, Germany; IHS Markit said the automobile sector’s falling exports were denting manufacturing activity in the eurozone
Source: Stephan Goerlich/imageBROKER/REX/Shutterstock

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