The IHS Markit Eurozone Manufacturing PMI® read 46.5 for July, down from 47.6 in June, indicating a deepening contraction of activity. This is the sixth consecutive month the survey has returned a reading below the no-change 50 mark.
Intermediate and investment goods sectors reported ongoing contractions, with the the deterioration in the latter the sharpest since November 2012. In contrast, growth was sustained amongst consumer goods producers.
Germany remained a source of weakness, with its manufacturing economy recording its sharpest deterioration in operating conditions for seven years. Austria recorded its lowest PMI level in just under five years, whilst France, Ireland, Italy and Spain also recorded contraction readings. Netherlands and Greece were the only economies to report expansion, although Dutch growth was only marginal.
The downturn was driven in the main by a sharp fall in new orders – the second sharpest recorded by the survey in six years. Export trade deteriorated to the greatest degree since November 2011, with German manufacturers recording the sharpest reduction. Ongoing trade tensions, continued difficulties in the automotive industry and political uncertainties all weighed on both internal and external demand. A deteriorating trend in order books led to output being cut by the greatest degree since April 2014, whilst the reduction in purchasing activity was the sharpest since end 2012. The latest data shows the greatest monthly fall in purchase inventories for nearly six years. Finished stocks were also cut.
Employment was undermined by falling current workloads and also concerns over future operating conditions, with forward indicators deteriorating.
Markit says, “the concern is that, while policymakers have become increasingly alarmed at the deteriorating conditions, there may be little monetary policy can do to address headwinds”, which were summarised again, as trade wars, Brexit and slower domestic and international economic growth.