By Daniel Hunter

The downturn in the Eurozone manufacturing sector extended into a fifteenth successive month in October, as domestic market conditions remained subdued and intra and extra-Eurozone trade flows deteriorated further.

At 45.4 in October, from 46.1 in September, the headline seasonally adjusted Markit Final Eurozone Manufacturing PMI was slightly above the earlier flash estimate of 45.3.

The downturn not only deepened, but also widened during the latest survey period. Only the Irish PMI stayed above the neutral 50.0 mark, as the Dutch PMI edged back into contraction territory. Rates of contraction accelerated in Germany, Italy, Spain, Austria and Greece. Although the downturn in France eased slightly, it remained stronger than the euro area average.

Manufacturing output declined for the eighth month in a row during October, and at a faster rate than in the previous month. Production fell across the consumer, intermediate and investment goods sectors, with by far the steeper rates of contraction seen in the latter two sectors.

Underlying the latest reduction in output was a further deterioration in new order inflows, as new business declined for the seventeenth successive month. Companies reported that weak domestic demand and declining international trade flows had led to reduced inflows of new business. Of the nations covered by the latest survey, only Ireland saw increases in both output and new orders.

“The manufacturing sector opened the final quarter of 2012 on a disappointing footing, as the downturn in the sector gathered pace," Rob Dobson, Senior Economist at Markit said.

"A broad-based decline in production was seen across the consumer, intermediate and investment goods sectors, as manufacturers faced a restrictive combination of weak demand from domestic markets and declining intra and extra-euro area trade flows. Cost caution also prevailed, leading to cut backs in employment, purchasing and the disinvestment of inventories.

“The national data also paint a bleaker picture. Contractions were seen in all nations except Ireland, with the majority reporting faster rates of decline than in September. This is further evidence that the ongoing weakness of the periphery is being combined with hollowing out of the previously strong core of France and Germany.

“News from the price front was also less than positive. Cost inflation has picked up sharply in recent months, which is providing an additional unwelcomed squeeze on margins at a time when weak demand and strong competition are constraining pricing power.”

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