Euro Zone Manufacturing Activity Remains in Contraction, Recovery Far Off: HCOB PMI Data
London, Reuters - The latest survey from S&P Global has revealed that Euro zone manufacturing activity continued to contract in August, with demand falling sharply. The final Purchasing Managers' Index (PMI) for the region stood at 45.8, slightly above the preliminary estimate of 45.6 but well below the growth threshold of 50.
The output index also saw a slight increase to 45.8 from 45.6 in July, indicating a challenging economic environment. According to Cyrus de la Rubia at Hamburg Commercial Bank, the manufacturing sector has been facing worsening business conditions for three consecutive months, extending the recession to 26 months.
New orders, both domestic and international, are slowing down significantly, with the index dropping to 43.3, the lowest since December. Additionally, demand from abroad has declined at the fastest rate this year. Manufacturers have responded by raising prices for the first time in 16 months, particularly in countries like France, the Netherlands, Greece, and Italy.
The decline in manufacturing prices could pose a challenge for the European Central Bank (ECB), which is already dealing with persistent inflation in services. Despite this, overall inflation in the Euro zone fell to a three-year low of 2.2% in August, signaling a need for further policy easing from the ECB.
According to an August Reuters poll, the ECB is expected to cut its deposit rate twice more this year, in September and December. This is in line with the majority of economists, who foresee fewer reductions than what the markets currently expect.
In conclusion, the latest PMI data points to ongoing challenges for the Euro zone manufacturing sector, with a prolonged recession and weakening demand. The ECB's upcoming policy decisions will be crucial in addressing these issues and supporting economic recovery in the region. Investors should keep a close eye on these developments to make informed decisions regarding their finances.
