The euro area manufacturing activity contracted for the fourth consecutive month in October signaling a recession, final survey results from S&P Global showed on Wednesday.
The manufacturing Purchasing Managers’ Index declined to 46.4 in October from 48.4 in the previous month. The score was below the preliminary estimate of 46.6.
Output and new orders declined at rates rarely surpassed across the 25 years of PMI data collection. Manufacturing output continued to fall further, extending the current sequence of contraction that started in June.
Export demand declined sharply as geopolitical uncertainty, high inflation and weaker economic conditions dampened foreign client spending.
With falling demand, manufacturers reduced their purchases of inputs to the quickest extent since May 2020.
Manufacturers reported another steep increase in their operating costs. Energy prices were a major factor that lifted expenses.
Nonetheless, input cost inflation was the second-weakest since the start of 2021. Likewise, the rate of output charge inflation down slightly to its second-lowest since April 2021.
Manufacturers continued to expect falling output volumes over the next 12 months. High inflation, geopolitical uncertainty and worsening global economic conditions underpinned the pessimistic outlook, the survey showed.
“Developments in the energy markets will remain a key focus for euro area manufacturers through the winter,” Joe Hayes, a senior economist at S&P Global Market Intelligence said.
“We remain mindful of the risk that atypical cold weather could ramp up the need for energy rationing, causing widespread disruption to manufacturing production,” Hayes added.
In the third quarter, the currency bloc grew at a slower pace of 0.2 percent sequentially, after the 0.8 percent expansion seen in the second quarter.
In the World Economic Outlook, released last month, the International Monetary Fund said the euro area is expected to witness the most pronounced slowdown as the energy crisis caused by the war in Ukraine continues to take a heavy toll, damping growth to 0.5 percent in 2023.
Among member countries, Spain was the worst-performing nation in October, closely followed by Germany, the PMI survey showed.
Spain’s manufacturing sector contracted the most since May 2020, with both output and new orders declining at rates not seen since the height of pandemic related lockdowns. The factory PMI posted 44.7 in October versus 49.0 in September.
The downturn in Germany’s manufacturing sector gathered pace in October. The S&P Global / BME factory PMI came in at 45.1 versus 47.8 in the previous month but above the flash 45.7.
The French manufacturing sector contracted the most in almost two-and-a-half years in October as new orders slumped at the fastest pace since May 2020. The final factory PMI weakened to 47.2 from 47.7 in the previous month. The flash reading was 47.4.
Italy’s factory activity also remained firmly on a contraction footing in October. The PMI slid to 46.5 from 48.3 in September. The indicator signaled contraction for a fourth successive month.
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