By Marcus Leach
The downturn in the eurozone manufacturing sector deepened in November.
The contractions in production and new orders both accelerated, and head counts were cut for the first time since April 2010. All of the nations covered by the survey saw output, new orders and new export orders fall.
The final Markit Eurozone Manufacturing (PMI) fell to 46.4 in November, from 47.1 in October, its lowest level since July 2009 and unchanged from the earlier flash estimate. The PMI has signalled contraction in each of the past four months.
PMIs were below 50.0 in all of the nations covered by the survey. The majority also saw their respective PMIs fall compared with October. PMIs for Italy and Greece were the only ones to rise since October, but these countries nevertheless remained among the weakest performers overall.
Production and new orders in the Eurozone’s manufacturing sector both contracted at the fastest rates for around two-and-a-half years in November. They have now fallen for four and six consecutive months respectively.
The substantial decline in new order inflows reflected weaker demand from both domestic and export markets. There were reports linking lower new order volumes to the deteriorating global economic outlook, destocking at clients and ongoing financial market uncertainty.
New export orders fell for the fifth month running, dropping at the steepest rate since May 2009.
Almost all of the nations covered by the survey reported substantial and accelerated declines in new export orders, with the fastest rates of contraction reported in Germany and Austria.
Falling inflows of new orders led to a further steep reduction in firms’ backlogs of work. The rate of decline matched October’s 28-month record.
“The final PMI data confirm the downbeat picture from the earlier flash results, with the Eurozone manufacturing sector suffering a faster rate of contraction in November," Chris Williamson, Chief Economist at Markit said.
"Both production and new orders fell at rates not seen since the height of the credit crunch in H1 2009. It was also the first month since mid-2009 that all countries saw output fall, highlighting the broadening-out of the downturn from the periphery to the core.
“The latest survey is broadly consistent with manufacturing output falling at a quarterly rate of 2%, and a further decline in the survey’s new orders to inventory ratio suggests that production is likely to be cut at an even faster rate in December.
“Manufacturers are now reducing headcounts again, in line with lower sales and the darker economic outlook. Uncertainty about the business environment has clearly grown with the escalation of the region’s debt crisis.
“The extent to which demand has collapsed in recent months is illustrated by the erosion of pricing power among both suppliers and manufacturers, though at least this should feed through to lower consumer price inflation.”
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