Eurozone manufacturing contracts faster in September

Manufacturing activity in the euro area contracted at a faster cadence in September, according to fresh data released on Monday morning, as new orders slid.

The S&P Global eurozone manufacturing purchasing managers’ index (PMI) came in at 48.4 for September, compared to the downwardly-revised reading of 49.6 for August.

It was just below the market consensus, which had pencilled in a reading of 48.5.

A PMI reading above 50 denotes expansion, while one below 50 signals contraction.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said manufacturing in the common currency area was now in a “broad-based” downturn.

In Spain, the PMI fell to 49.0 from 49.9 in August, while the Italian index rose slightly to 48.3 from 48.0 August.

The French PMI was revised down marginally, to 47.7 from 47.8 in the advance estimate, as was the German index, to 47.8 from 48.3 in the initial report.

“New orders are sliding due to rising economic uncertainty and lingering inflation, pulling down production and purchasing activity,” Vistesen said.

“This, in turn, dragged down firms’ outlook for the future to the lowest since May 2020.

“Output fell for the fourth month on the spin, with some respondents noting that high energy prices are now squeezing production, beyond the more direct hit from falling orders.”

Vistesen said work backlogs eased further, and employment growth slipped, reflecting the overall downshift in activity.

“On the supply side, delivery times eased again, but input price inflation accelerated, due to rising energy prices.”

Vistesen said the EZ manufacturing PMI plunged in the third quarter, with the early industrial production numbers suggesting that output was following.

“We fear this is the beginning of a more protracted downturn.

“Indeed, we suspect the PMI could well be underestimating the incoming hit to production due to the risk of a sharp fall in energy-intensive manufacturing, which makes up around 16% of total production.”

Reporting by Josh White at Sharecast.com.