Tuesday 1 October 2019 1:19 pm

Eurozone manufacturing sector suffers worst month in seven years

The Eurozone’s manufacturing sector suffered its worst month in seven years in September, according to a closely-followed industry survey, as the malaise in the area’s economy shows no sign of relenting.

Read more: Sterling sinks after ‘simply shocking’ manufacturing data

Factory output decreased markedly in September, with IHS Markit’s Eurozone manufacturing purchasing managers’ index (PMI) falling to 45.7, the sector’s worst performance since October 2012. A score of under 50 indicates contraction.

Meanwhile, Germany’s manufacturing industry – once the powerhouse of Europe – sank to its worst performance since the depths of the financial crisis a decade ago with an index score of 41.7.

September became the eighth month in a row that Eurozone factory activity has fallen and there are few signs the region’s woes are abating.

The single currency area has suffered due to the US-China tariff war stunting global trade, a general global slowdown and ongoing wrangling over Brexit.

The zone’s biggest economy Germany has had a particularly torrid time. Its export-dependent economy has been hard-hit by trade tensions and growth in China slowing down.

Phil Smith, principal economist at IHS Markit, added that the signs point to Germany’s “downturn deepening”.

“The downward trend in new orders – which fell the most in more than 10 years – is a particular worry, and continues drive cutbacks in factory output, employment and prices,” he said.

“The severity of the job losses across manufacturing we are now seeing could start to weigh more heavily on consumer confidence, which up to this point has been relatively resilient.”

Katharina Utermohl, senior economist at trade credit insurer Euler Hermes, said Germany’s “automotive sector – the darling of the country’s manufacturing industry – has experienced a decline in production since early last year that is comparable to the crisis years of 2008 and 2009”.

Read more: Eurozone comes close to a standstill as activity hits six-year low

She said: “The ongoing saturation of large sales markets, particularly in China, stricter environmental regulation… and trends such as car-sharing which will preclude a v-shaped recovery for the car industry.”

Main image credit: Getty