Despite some slight improvement, Euro zone manufacturing activity continued to contract in August, according to a recent survey by HCOB. The Purchasing Managers’ Index (PMI) stood at 45.8, slightly higher than the initial estimate of 45.6 but still below the crucial 50 mark that signifies growth.
The data suggests that a recovery may still be a ways off, as demand experienced its sharpest decline of the year. The index measuring output also inched up to 45.8 from 45.6 in July, indicating a challenging economic landscape.
Cyrus de la Rubia, an expert from Hamburg Commercial Bank, commented on the situation, saying, “Things are going downhill, and fast. The manufacturing sector has been stuck in a rut, with business conditions worsening consistently for the past three months.”
New orders, both domestically and internationally, are slowing down further, dimming hopes for a quick rebound. The index covering new orders plummeted to 43.3, its lowest level since December, while demand from foreign markets also declined sharply.
Despite this decline, manufacturers raised their prices for the first time in 16 months, primarily driven by factories in France, the Netherlands, Greece, and Italy. This rise in prices could pose a challenge for the European Central Bank, which has been dealing with persistent inflation in services.
On a positive note, overall inflation in the Euro zone fell to a three-year low of 2.2% in August, indicating a need for further policy easing from the ECB. Economists predict that the bank will cut its deposit rate twice more this year, in September and December, alleviating some of the market uncertainties.
This data highlights the ongoing challenges faced by the Euro zone manufacturing sector and underscores the need for proactive measures to stimulate growth and stability.