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Markit: Eurozone stays stagnant in October

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Markit:  Eurozone stays stagnant in October

Manufacturing PMI for the Eurozone shows an economy treading water.

The eurozone manufacturing sector remained in a state of near-stagnation in October, as weak demand continued to restrict growth of both output and employment across the currency union.

At 50.6 in October, up from September’s 14-month low of 50.3, the final seasonally adjusted Markit Eurozone Manufacturing PMI  registered only marginally above the neutral 50.0 mark. That said, the current sequence above the no-change level was extended to 16 months.

“Perhaps most worrying is the trend in new orders, a key bellwether of future output growth."

National PMI data again highlighted the ongoing performance disparities between countries. Four nations signaled expansion during October, with the Irish PMI remaining far out in front and ticking higher following a slight easing in September. The PMI for the Netherlands also gained, moving into second position, while the Spanish PMI held steady.

Germany was the only other nation to signal improved overall manufacturing performance in October. Of the remaining big-three nations, the downturn in France accelerated and Italy fell back into contraction. The rate of deterioration in Greece eased, while Austria fell further from the rest of the pack as its PMI sank to a two-year low.

Rob Dodson, a Senior Economist at Markit, commented on the report.  “The performance of Eurozone manufacturing remained broadly flat at the start of the final quarter, as the sector struggles to recover the traction lost following its mid-year slowdown. Manufacturing is therefore unlikely to provide any meaningful boost to the currency union’s anemic GDP growth.

“Perhaps most worrying is the trend in new orders, a key bellwether of future output growth, which declined for the second month running. It is hard to see any significant near-term boost to performance while market demand remains insipid and beset by lackluster domestic conditions, slowing export growth and ongoing economic uncertainties.

“National growth disparities also remain a concern, as solid expansions in Ireland, the Netherlands and Spain provide a marked contrast to the downturns in Italy, Greece, France and Austria. The German industrial engine is also achieving only modest growth.

“Not surprisingly, this is forcing firms to focus on cost-cutting and competitiveness, at the expense of employment and margins, as they strive to boost sales volumes.  This is likely to hold up the already higher unemployment rates across much of the currency union, as firms lack the profitability and demand requisite to expand capacity.”

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