Manufacturers report gloomy EU conditions

Ben Southwood
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EUROZONE manufacturing was hammered again by political and financial worries last month, according to survey data released by Markit yesterday.

The overall purchasing managers’ index (PMI) remained at 45.1 for the Eurozone in June, slightly up from the preliminary estimate of 44.8, following the same pace of decline in May.

The index records firms’ views on manufacturing conditions – values above 50 show rising output, whereas values below 50 signify declining activity in the sector.

“European companies are reducing inventories and staffing levels as production and new orders fall,” said Berenberg Bank’s Christian Schulz.

Chris Williamson, chief economist at Markit, warned the situation may worsen further in coming months.

“Companies’ biggest fear is slumping demand, hit by heightened uncertainty,” he said.

Spain’s PMI crashed to a 37-month low of 41.1, while Germany’s hit a three-year low of 45. Greece, Italy and France all saw heavy declines, with PMIs of 40.1, 44.6 and 45.2 respectively.

Overall, only Ireland saw a meaningfully positive value, hitting a 14-month high of 53.1. Austria posted 50.1, indicating very slight growth.

...but UK avoids the worst as decline continues

MANUFACTURERS in the UK were hit less hard last month than in May, though they remained in decline, according to Markit/CIPS data released yesterday.

The purchasing managers’ index for the UK went up to 48.6, from May’s three-year low of 45.9, but it remains below the no-change level of 50, showing a continued fall in business activity in the sector.

Economist Howard Archer at IHS Global Insight said: “UK manufacturers clearly face a very challenging domestic and international environment. Domestic demand is handicapped by a squeeze on consumers’ purchasing power [and] tighter public spending.

“Eurozone weakness is limiting demand for UK manufactured goods,” while exporters have had to cope with sterling hitting a 33-month high in May, he added.

Input prices dived, falling at the fastest pace in three years. Analysts believe this was mainly driven by an easing in global oil prices in the last quarter.