EURO zone manufacturing growth slowed slightly more than initially thought last month as new orders dwindled and factories suffered amid rising tensions in Ukraine, a business survey showed yesterday.
Factories barely increased prices last month, and manufacturing activity in France fell at the fastest pace in 15 months, in disappointing news for the European Central Bank (ECB) before Thursday’s meeting to set monetary policy.
Markit’s final manufacturing purchasing managers’ index (PMI) for last month came in at 50.7 points, the lowest in a year and below both July’s 51.8 and an earlier flash estimate of 50.8. Still, August did mark the 14th month the index has been above the 50 line that separates growth from contraction.
An index measuring output, which feeds into a composite PMI due tomorrow that is seen as a good guide to growth, sank to a 14-month low of 51 from July’s 52.7 but was just ahead of the flash reading of 50.9.
“Although some growth is better than no growth at all, the braking effect of rising economic and geopolitical uncertainties on manufacturers is becoming more visible,” said Markit economist Rob Dobson.
Tensions between Russia and Ukraine threaten to damage the region’s fragile recovery.
The factory PMI for Germany, Russia’s biggest trade partner in the EU, fell to an 11-month low of 51.4. In France, the bloc’s second-largest economy, the PMI fell to 46.9.
“France remains a real concern, as does Italy… Signs that growth impetus waned in the key industrial engine of Germany, and in Spain and the Netherlands too, is also less than reassuring,” Dobson said.
“The slowdown in industry is likely to add further fuel to the fire for analysts expecting additional monetary or fiscal stimulus to be implemented.”
The ECB would probably launch a quantitative easing programme by March next year in a bid to prevent deflation and jumpstart economic growth, but it is not expected to change policy this week, a Reuters poll found last week.
Prices rose just 0.3 percent last month, the smallest increase since October 2009, and the output price index in the PMI survey was only just above the break-even mark at 50.3. That was above July’s 50.1 but below a flash reading of 50.4. – Reuters