The rate of expansion in eurozone manufacturing production eased to its lowest during the current 14-month growth sequence in August, as companies faced slower increases in both total new orders and new export business.
The final seasonally adjusted Markit Eurozone Manufacturing PMI came at 50.7 in August, down from 51.8 in July, its lowest reading since July last year. The headline PMI was also below its earlier flash estimate of 50.8.
National PMI data signalled a broad easing in the manufacturing recoveries underway across much of the currency union. Although Ireland was a noticeable exception, with its PMI at the highest level since the end of 1999, rates of expansion slowed in Spain, the Netherlands and Germany.
The Greek PMI edged back above the 50 mark in August, while the rate of growth in Austria held steady. France remained the laggard, with its PMI signalling the sharpest rate of decline since May 2013, while Italy dropped back into contraction territory following 13 months of expansion.
The rate of expansion in new work received also slowed to the weakest in the current 14-month period of growth. Economic and geopolitical uncertainties were the main factors underlying slower demand growth. Inflows of new export business posted the slowest rise since July 2013.
France was the only nation to report an outright decline in new export orders in August, while rates of increase eased in Germany, Italy and Greece. Ireland, Spain and Austria reported stronger inflows of new export business.
With the trend in new order inflows still generally lacklustre overall, backlogs of work fell further and companies trimmed their payrolls for the second straight month. Although the reduction in headcounts was only slight, it was nonetheless the steepest since November 2013.
The big-three nations of Germany, France and Italy all reported job losses, as did Greece. Staffing rose in Spain, the Netherlands, Austria and Ireland, but Ireland was the only nation to report a faster pace of hiring than in July.
Signs that the manufacturing sector may be on course for further easing in the coming months was signalled by data on purchasing and stock holdings.
Input buying volumes fell for the first time in over a year and inventories were reduced further as strong competition led companies to maintain a cost-cautious position. Meanwhile, the forward-looking ratio of new orders to finished goods inventories dipped to a 13-month low.
Rob Dobson, senior economist at Markit said, 'The eurozone manufacturing sector lost further growth momentum in August, with the recovery in production slowing for the fourth straight month to the weakest in the current 14-month sequence of expansion.''
'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. This is also the case on the demand front, with growth of new orders and new export business both slowing in August.
'National data provided some bright spots, with the Irish numbers still buoyant and signs that Greece managed to move back into expansion territory. France remains a real concern though, with its manufacturing sector contracting at the quickest pace since May 2013, as does Italy's descent from solid expansion to stagnation. Signs that growth impetus waned in the key industrial engine of Germany, and in Spain and the Netherlands too, is also less than reassuring.'
'The slowdown in industry is likely to add further fuel to the fire for analysts expecting additional monetary or fiscal stimulus to be implemented. Eyes will now turn to the services PMI numbers on Wednesday for further clues on underlying growth momentum and whether policymakers can continue to wait for earlier measures to start to deliver.'
