The eurozone manufacturing sector continued to contract midway through the third quarter this year, according to S&P Global, which recently said output fell similar to the July pace—the strongest since May 2020, while new orders sharply declined once again. Weak demand conditions badly hit goods producers in August, reflecting deteriorating purchasing power across Europe amid high inflation.

The final S&P eurozone manufacturing purchasing managers’ index (PMI) was at 49.6 (49.8 in July). Overall, this was the lowest reading since June 2020 and signalled a second successive deterioration in manufacturing operating conditions, S&P Global said.

The eurozone manufacturing sector continued to contract midway through the third quarter, said S&P Global. Output fell similar to the July pace—the strongest since May 2020, while new orders sharply declined once again. Weak demand conditions badly hit goods producers in August, reflecting deteriorating purchasing power across Europe amid high inflation.

Manufacturers subsequently cut their buying activity back further in response to the darkening economic outlook, although the reduced need for inputs helped lower the strain on suppliers, S&P Global said in a release.

Meanwhile, there were further signs of price pressures coming further down from their peak as rates of input cost and output charge inflation slowed to 19- and 16-month lows respectively.

Of the monitored euro area countries, only three—the Netherlands (52.6), Ireland (51.1) and France (50.6)—recorded manufacturing PMIs in growth territory during August, although this masked declines in both output and new orders in each case. Both the Netherlands and Ireland saw the rate of expansion slow to a 22-month low.

Elsewhere, sharper downturns were seen in Germany, Austria, Greece and Italy, with the latter seeing the strongest manufacturing downturn in August.

Eurozone manufacturing output fell, marking a third successive monthly decline. The final eurozone manufacturing output index was at 46.5 (46.3 in July). The reduction was solid overall and broadly similar to that seen in July, which was the quickest since May 2020.

According to survey respondents, production volumes fell due to lower incoming new orders, although some continued to report material shortages.

Demand for euro area goods fell sharply again in August and marked a fourth consecutive reduction. High prices, overstocked customers and reports of order postponements due to economic uncertainty were mentioned by manufacturers.

New export sales also fell, with the decline accelerating to the fastest since June 2020. With production requirements falling, eurozone manufacturing firms reduced their input purchasing in August. The drop was of a similar strength to that seen in July (which was the fastest in just over two years).

Amid falling input demand, the strain on suppliers continued to ease, but vendor performance continued to worsen overall as transportation issues and shortages of certain materials persisted.

Manufacturing inventory levels rose further during August. In fact, despite lower production, stocks of finished goods increased at the fastest rate on record due to a lack of incoming new work.

Fibre2Fashion News Desk (DS)