The latest data for the Eurozone suggests that the continent’s recession is deepening. The Markit Flash Manufacturing Purchasing Managers’ Index (PMI) for the Eurozone declined from 46.3 in August to 45.9 in September. The “flash” PMI is an advanced measure of the final PMI data using 85 to 90 percent of the total responses. As with other PMI indicators, values under 50 indicate a contraction in the economy, and this suggests that the European economy has contracted for 12 of the past 13 months.
Manufacturing losses were greater than in the services sector, with production and new orders continuing to contract. In terms of national breakdowns, the French economy appears to be worsening, with its flash PMI value falling to 39.8 from 45.3. Slower new sales were the primary reason for the drop, with new exports off dramatically. Employment was also lower.
Meanwhile, the German economy – while still in contraction – appeared to be improving, with its flash PMI up from 47.0 to 49.7. This was due to a modest expansion in the service sector, with manufacturing output still lower. As with France and the rest of the continent, contracting new orders led to reduced levels of overall business activity among manufacturers, including less employment. Data for other nations will be forthcoming in the next couple weeks.
In contrast to European markets, the Markit Flash Manufacturing PMI for the United States was unchanged in September at 51.5. The subcomponents of this index were mixed. New orders expanded at a faster rate – albeit with modest growth – from 51.9 to 52.4. There were similar marginal gains in the indices for employment. At the same time, output levels eased from 51.9 to 51.2, and new export orders further contracted from 48.8 to 47.9. Input prices also expanded, as we have started to see raw material costs start to turn higher in the past month.
The Markit PMI results continue to differ from the more widely-cited PMI from the Institute for Supply Management, which has suggested that the U.S. manufacturing sector has contracted for three consecutive months. At the same time, it does clearly indicate that new export orders have contracted, with slowing global growth worldwide. This is backed up by the data from Europe discussed above.
Chad Moutray is chief economist, National Association of Manufacturers.
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