Eurozone manufacturing sector contracts in February

LONDON (ICIS)–Eurozone manufacturing output contracted month on month in February for the first time in more than five-and-a-half years as a sharp fall in new work orders and an uncertain economic climate weighed on growth, analyst IHS Markit said on Friday.

The eurozone manufacturing purchasing managers’ index softened to 49.3 during the month, driven by contractions for several key economies in the bloc.

Germany’s manufacturing sector PMI for the month dropped to 47.6, the lowest level in six years, as industrial growth continued to be depressed by weaker exports and automotive sector weakness.

Spain and Italy also saw contractions during the month, dropping to 49.9 and 47.7 respectively. A PMI score of above 50.0 signifies growth.

Conditions were better in France, the Netherlands and Austria, which registered manufacturing sector PMI scores of 51.5, 52.7 and 51.8 respectively, but this was insufficient to stem an overall decline.

Backlogs of work fell for the sixth consecutive month, but employment continued to build, as did evidence of spare capacity, while raw material price pressure dropped off as a result of lower oil prices and reduced supply-side constraints.

Despite the stabilisation of some drivers for the sector, new orders are falling at the sharpest rate in seven years, meaning that production is also likely to fall, and future indicators are similarly bearish at present, according to Markit chief business economist Chris Williamson.

“Spare capacity is consequently developing, which means companies are likely to take a more cautious approach to hiring and investment, and instead focus on cost controls,” he said.

“In addition to widespread trade war worries, often linked to US tariffs, and concerns regarding the outlook for the global economy, companies report that heightened political uncertainty, including Brexit, is hitting demand and driving increased risk aversion,” he added.

Pictured: Hamburg Harbour in Germany; weaker exports took a toll on the eurozone’s largest economy in February
Picture source: imageBROKER/REX/Shutterstock