European factory activity shrinks at most rapid pace since 2012

European factory activity shrinks at most rapid pace since 2012

State of eurozone industry goes from ‘bad to worse’

Europe’s manufacturing slump deepened in September, as a key gauge of factory activity fell to a near-seven year low and industry executives remained downbeat about the year ahead.

The purchasing managers’ index (PMI) for the eurozone fell to 45.7 last month, down from 47 in August and its lowest reading since October 2012.

The final figures, released on Tuesday, were only a marginal improvement on ‘flash’ estimates released in September which knocked the euro and sparked predictions of an imminent recession.

Germany — the eurozone’s export powerhouse which is enduring a prolonged slump that is shaking the region’s factories — saw its reading fall to 41.7, its lowest since June 2009.

“Germany has had a shocker of a year. As one of the most open of large economies, it is particularly exposed to global economic shocks,” said Seema Shah, chief strategist at Principle Global Investors.

Spain, Italy and France all saw readings which missed economists’ expectations, with only France recording any growth in activity. Spanish activity shrunk at its fastest pace since 2013.

September was the eighth consecutive month that the eurozone PMI reading has posted below 50, which signifies economic contraction. There was a sharp fall in new orders, while business sentiment hovered around its lowest level since November 2012.

In a further worrying sign for the months ahead, there was a fifth successive monthly fall in employment, with jobs cut in September as the fastest rate since 2013.

“The health of the eurozone manufacturing sector went from bad to worse in September, with the PMI survey indicating the steepest downturn for nearly seven years and sending increasingly grim signals for the fourth quarter,” said Chris Williamson, chief business economist at IHS Markit.

In Sweden, the industry fell into contraction for its worst performance since 2008, knocking the krona 0.4 per cent against the euro. The manufacturing PMI fell to 46.3 in September, from a revised 51.8 the previous month, according to data compilers Swedbank and Silf.

“A PMI-tastrophe,” said Martin Enlund, global chief foreign exchange strategist at Nordea. “Details horrible. Further proof the Riksbank is wrong on everything that matters.”

“Where Sweden goes, the euro area follows,” he added.

Figures for the UK will be released later on Tuesday, while separate Institute for Supply Management data on US manufacturing are due in New York hours.

Philip Georgiadis and Sarah Provan

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