Growth in the eurozone manufacturing sector lost momentum in August. Rates of expansion slowed for production, new orders and new export business, resulting in weaker job creation.
The final Markit Eurozone Manufacturing PMI® posted 51.7 in August, a three-month low and down further from June’s year-to-date high. The final reading was also a tick below its earlier flash estimate of 51.8. The PMI has now signalled growth for 38 consecutive months, marking a continuation of its survey-record unbroken
sequence above the 50.0 stagnation mark.
Growth of euro area manufacturing production slowed to a three-month low, while new order inflows rose to the weakest extent in one-and-a-half years. Companies reported slower increases in new business from domestic and export sources.
Headline PMI data signalled that six out of the eight nations covered by the survey saw expansions during August. Growth imbalances remained, however. Germany and the Netherlands registered solid expansions, whereas growth was relatively subdued in Austria, Spain and Greece. Contractions were seen in both France and Italy.
For France, this represented an extension of the current manufacturing downturn to six months. A stabilisation of production volumes was offset by the steepest drop in new orders for four months. Meanwhile, the contraction signalled by the Italian PMI was the first since January 2015, as output growth slowed to near-stagnation and new order inflows decreased for the first time in 19 months.
New export orders* in the euro area manufacturing sector rose at the slowest pace since May, with Germany and the Netherlands the only nations to report meaningful increases. Although Italy, Spain and Greece posted marginal expansions, only the latter two also saw growth accelerate. New export orders contracted in France, Austria and Ireland.
August saw job creation in the eurozone manufacturing sector ease to its weakest since March. The outlook for staffing levels remained mildly positive, however, as backlogs of work rose at the fastest pace for two-and-a-half years.
Only France failed to register an increase in employment, with its rate of decline also accelerating to the quickest since May. However, among the countries reporting increases, only Ireland saw its pace of job creation improve.
Average output charges declined for the twelfth successive month in August. This mainly reflected a combination of strong competitive forces and subdued cost inflation. Only Spain and Ireland saw output charges rise during the latest survey month.
Input prices increased for the second month running, following a near year-long sequence of decline. However, the rate of inflation remained only marginal.
Five out of the eight nations covered saw input costs rise. The exceptions were Italy, the Netherlands and Austria, although rates of decrease were only marginal in each case.
Chris Williamson, Chief Business Economist at IHS Markit said:
There is some suggestion of a Brexit impact, however, and growth may wane further in September after new orders growth slipped to a one-and-a-half year low. Anecdotal evidence suggests that the strengthening of the euro and reduced sales to the UK were partly to blame for the order book slowdown. (…)
Once again, it’s also a worryingly mixed picture across the region. Northern countries including Germany, the Netherlands and Austria are providing the main power to the expansion, but elsewhere the picture is looking more subdued. France and Italy are in decline, Greece is stagnating and both Spain and Ireland are enduring
their worst growth spells since mid-2013.
