Eurozone Manufacturing Activity Contracts Further In August

The euro area manufacturing activity shrank for the second straight month in August, adding to fears of recession in the currency bloc, final survey data from S&P Global showed Thursday.

The final factory Purchasing Managers’ Index declined to a 26-month low of 49.6 in August from 49.8 in the previous month.

The flash score was 49.7. The reading was below the neutral 50.0 mark for the second straight month.

Forward looking indicators suggest that the downturn is likely to intensify, potentially markedly- in coming months, meaning recession risks have risen, Chris Williamson, chief business economist at S&P Global Market Intelligence said.

The survey revealed that output declined at the same pace as seen in July, which was the strongest since May 2020. New orders declined sharply once again.

Amid darkening economic outlook, manufacturers cut their buying activity back further and manufacturing inventory levels rose again in August.

Despite lower production, stocks of finished goods increased at the fastest rate on record due to a lack of incoming new work. Employment grew at the weakest extent in a year-and-a-half.

Nonetheless, there were signs of price pressures easing from their peaks. Input cost and output charge inflation slowed to 19- and 16-month lows respectively.

Finally, business confidence edged up slightly from July’s 26-month low in August.
Among big-four economies, Germany and Italy reported sharper downturns. The only country to see a PMI above 50.0 was France.

After two-year period of growth, Germany’s factory activity entered the contraction territory for the second successive month. The S&P Global/BME final factory PMI came in at 49.1 versus 49.3 in July and also below the flash 49.8.

On the other hand, France’s factory PMI posted 50.6, up from 49.5 in July. The reading was revised up from 49.0. Although the score moved back above the vital 50.0 threshold, S&P said it masked clear weakness as both output and new orders continued to fall.

Italy’s manufacturing sector registered a back-to-back deterioration in August due to weak production and orders. The factory PMI dropped to 48.0 in August, as economists’ expected, from 48.5 in July.

Meanwhile, Spain’s manufacturing activity broadly stagnated in August as production rose slightly, while new orders dropped again. The PMI unexpectedly rose to 49.9 from 48.7 in July. The reading was forecast to fall to 48.5.

Among other monitored countries, only the Netherlands and Ireland Manufacturing PMIs were in growth territory.

The Nevi Netherlands factory PMI came in at 52.6 in August, down from 54.5 in July. The headline AIB Ireland Manufacturing PMI registered 51.1 in August, down from July’s 51.8.

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