Economic Buzz: Eurozone manufacturing PMI dips back into contraction as factory orders decline

The HCOB Eurozone Manufacturing PMI, a measure of the overall health of eurozone factories compiled by S&P Global, slipped back into contraction in September, reversing the first improvement seen in over three years during August. Falling from 50.7 in August to 49.8, the headline index signalled a deterioration in factory operating conditions across the euro area. That said, the decline was only marginal overall.

Factory operating conditions within the eurozone worsened at the end of the third quarter, reversing August?s improvement. September?s contraction in the headline HCOB PMI was driven by a reduction in new order inflows and a sharper rate of job shedding.

Production volumes continued to expand, although the pace of growth slowed markedly from August?s near threeand-a-half-year high. As for factory purchasing activity, September saw cutbacks accelerate, while pre- and post-production inventories were reduced further.

Firms remained optimistic on balance that output would rise from present levels over the coming year, although expectations were their softest since April. As for prices, there were broad-based declines at the end of the third quarter as both input costs and output charges fell marginally.

Pulling the headline index into the contraction zone was a marked decline in its weightiest component, new orders. After rising for the first time in almost three-and-a-half years in August, the volume of new orders received by eurozone manufacturers decreased in September.

Further growth in output was achieved despite ramped up job cutting at eurozone factories. Workforce numbers fell at the quickest rate in three months.

Purchasing was reduced by surveyed companies at the end of the third quarter. After coming close to stabilising as recently as July, the rate of decline in buying activity has accelerated in back-to-back months.

For the first time since June, eurozone manufacturers reported lower operating costs ? a notable deviation from the solid inflationary trend witnessed across the survey on average.

Looking ahead, euro area goods producers were optimistic that output would be higher than present levels in 12 months? time, although expectations were their weakest since April.

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