Eurozone manufacturing activity hits lowest level since 2016 - IHS/Markit
Growth in the eurozone manufacturing sector slowed a little in November, to its lowest level in more than two years, according to data released on Monday.
IHS/Markit's final purchasing managers' index printed at 51.8 from 52.0 in October, coming in slightly above the consensus and flash estimate of 51.5.
Although it was above the 50.0 mark that separates contraction from expansion, it marked the lowest reading since August 2016, with weakness centred on the investment goods sector.
Capital goods producers registered net falls in both production and new work, while export trade was also down for a third month running, and cost pressures remained elevated. In contrast, solid growth continued to be recorded among consumer goods producers.
The Spanish PMI rose to 52.6 in November from 51.8 the month before, while the PMIs for France and Germany were revised a touch higher to 50.8 and 51.8, respectively. In Italy, however, the index fell to 48.6 from 49.2 in October.
Chris Williamson, chief business economist at IHS Markit, said: "November’s PMI data underscore the extent to which manufacturing conditions have become more challenging, indicating that production could act as a drag on the eurozone economy in the fourth quarter.
"Manufacturers reported that demand is now falling in Germany, France and Italy, while only modest growth was recorded in Spain.
"The darker outlook is linked to trade wars and tariffs as well as intensifying political uncertainty and has led to increased risk aversion and a commensurate cutting back on expenditure, notably for investment. Producers of investment goods such as plant and machinery reported the steepest drop in demand in November, with reduced capital spending by companies compounded by on-going disruption of business in the autos sector."
Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said: "The overall details remain soft. Output increased, but new orders fell further, especially in the auto sector, leading firms to clear work backlogs at a faster pace. As a result, the rise in payrolls slowed, and firms expressed a fear that this trend would continue if the slowdown in new orders was sustained.
"The upshot amid all this bad news is that we can probably discount the reference to business executives’ fears of trade wars and tariffs following this weekend’s truce between the US and China. Indeed, we would expect forward-looking sentiment to improve significantly next month, provided that the truce is not broken."