Euro Zone Manufacturing Faces Steepest Contraction Since 1997

02.10.2023 posted by Admin

Euro Zone's Manufacturing Decline in September

The Euro zone's manufacturing sector faced continued challenges in the previous month, with a survey revealing a significant and widespread decline in activity. This decline in demand was among the steepest observed since data collection began in 1997.

According to the final Euro zone manufacturing Purchasing Managers' Index (PMI) by HCOB and S&P Global, September saw a slight dip to 43.4 from August's 43.5, in line with earlier estimates. Any reading below 50 indicates a contraction in activity.

The index measuring production, which contributes to an overall economic health indicator known as the composite PMI, dropped from 43.4 to 43.1.

Cyrus de la Rubia, the chief economist at Hamburg Commercial Bank, commented on the situation, saying, "The output PMI remained below 50 throughout the third quarter, indicating a sustained manufacturing recession during this period."

He added, "In terms of September PMIs, France and Germany experienced more significant declines, while Spain and Italy were somewhat less affected."

Although the new orders index did show a slight increase last month, rising to 39.2 from 39.0 in August, it remained well below the point of breakeven.

Interestingly, this drop in demand occurred even as the three-month average of factory prices fell at a pace not seen since the Great Recession of 2008/2009, as noted by HCOB's de la Rubia.

For policymakers at the European Central Bank, who have been struggling to reach their inflation targets, the news of falling prices may be somewhat welcome. Last month, they raised interest rates for the tenth consecutive time, but according to a poll of economists, they are likely to keep rates on hold until at least July of the following year.
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