The rot has finally reached the heart of the Eurozone as the regions manufacturing sector posted its worst performance since the depths of the Great Recession in 2009, making it inevitable that Europe will fall into a deep double-dip recession by the end of the year.
The Euro-zones manufacturing PMI came in at 46.1 in September, the 11th sub-50 reading in row meaning that the sector has been contracting for nearly a year. Any figure under 50 indicates contraction.
“Despite seeing some easing in the rate of decline last month, manufacturers across the euro area suffered the worst quarter for three years in the three months to September,” said Chris Williamson, chief economist at data collator Markit.
“The sector will act as a severe drag on economic growth. It therefore seems inevitable that the region will have fallen back into a new recession in the third quarter.”
Germany’s factory output had been the strongest producer in the region, performing so well that it enabled Europe to avoid slipping into a recession during the last quarter. The country’s manufacturing sector suffered another weak month, shrinking for the seventh month in a row. Germany did however break the trend by posting a figure of 47.4 which is its best performance since March.
Elsewhere Italy’s output shrank for the 14th month in a row with the PMI coming in at 45.5, up from Augusts 42.2. Poland posted its weakest PMI data since July 2009. The UK’s PMI came in at 48.4 down from August’s level of 49.6.
In France the situation worsened dramatically with its PMI seeing one of the biggest one-month falls in the survey’s 14-year history.
“France is perhaps the new worry, with its PMI slumping to the lowest for three-and-a-half years,” Williamson said.
France had a bleak month with its manufacturing sector declining by its fastest pace for three and a half years. The French manufacturing PMI fell to just 42.7 in September, down from 46.0 in August. The data is sure to spook President Hollande who will now have to take measures to limit the impacts of the now certain recession. With such poor data France could receive a real hammering.
It’s been a bad start to October for the Euro-zone but the markets are hopeful that some key decisions to finally bring the Euro-crisis to an end will be made at a series of key summits later this month.
The Pound to Euro exchange rate is currently trading at 1.2524
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