Euro zone production revised downward


EURO ZONE manufacturing contracted for the 13th consecutive month in August, as exports in Germany, the bloc’s main engine of growth, fell at the steepest rate in three years, according to a purchasing managers’ index.

The Markit manufacturing PMI for the 17-country euro bloc was revised to 45.1 from the initially estimated 45.3. Although above July’s 37-month low of 44, it still remained significantly below the 50 mark which indicates a contraction.

The figures contrasted with more encouraging manufacturing numbers from Britain, also released yesterday, which showed a bounce to 49.5 from 45.2 in July.

But they reflect disappointing data from China, which pointed to a more serious downturn than Beijing had been anticipating, said economists. Spain, Greece and Ireland – three of the euro zone’s most troubled economies – showed some signs of improvement. Economists said there was little reason to cheer, however, as recent rising unemployment data highlighted how tough austerity measures were taking a toll on growth. Ireland, which has weathered the manufacturing slowdown better than many of its peers, saw the NCB Purchasing Managers’ Index read 50.9 last month, indicating marginal expansion. However, that was down sharply on the reading of 53.9 in July and its lowest level in four months.

Analysts said although the euro zone’s PMI rate of decline was easing, euro zone gross domestic product was likely to contract in the third quarter, which would mark the euro region’s second recession in three years. GDP for the single-currency area shrank 0.2 per cent in the second quarter.

“The broader long-run issue is that the euro zone product and labour markets are unlikely to show any real sustained improvement until regional structural issues are addressed and the broader global backdrop brightens,” said Rob Dobson, an economist at Markit.

Germany’s manufacturing PMI rose to 44.7 in August from 43 the previous month, while Italy’s PMI suffered most, as industrial activity dropped to a 10-month low, down to 43.6 from 44.3 in July, suggesting that the recession in the sector is deepening, according to Markit.

Worsening manufacturing conditions, coupled with record unemployment as well as negative growth, will add pressure on the European Central Bank to cut rates at its policy meeting this week, said Howard Archer, European economist at Capital Economics. – (Copyright The Financial Times Limited 2012/Reuters)