Euro area PMI dips; US sees contraction

LONDON/WASHINGTON • New orders by factories in the euro area rose at the weakest pace in 18 months in August as both domestic and export demand faltered amid heightened uncertainty after Britain's vote to quit the European Union.

A Purchasing Managers' Index (PMI) for manufacturing fell to 51.7 in August from 52 in July, IHS Markit said yesterday.

The decline, which was steeper than estimated, was driven by a slowdown in order growth. The measure remained above the 50 level that divides expansion and contraction.

"Euro zone manufacturers reported a wavering performance in August, with signs that growth could slow further in coming months," said Mr Chris Williamson, chief business economist at IHS Markit.

"Anecdotal evidence suggests that the strengthening of the euro and reduced sales to the UK were partly to blame for the order book slowdown."

Markit said the slower order inflows signalled that the Brexit vote might be feeding through to the region's economy.

The report comes a week before the European Central Bank's governing council reconvenes to decide on any further policy action.

While manufacturing in six of the eight economies covered by the survey expanded, with Germany and the Netherlands leading the way, the overall index was dragged lower by a continued downturn in France and Italy's first contraction since January last year.

Job creation also took a hit, the survey showed, with only Ireland seeing an acceleration in hiring.

In the United States, the manufacturing sector contracted in August, with production, employment and new orders all pulling back after five straight months of expansion, the Institute for Supply Management (ISM) reported yesterday.

The ISM PMI for the month fell to 49.4, down from 52.6 in July. The unexpected fall indicated that some of the first-half weakness in the US economy spilled over into the third quarter, and that manufacturers continue to struggle with the weak global economy and the strong dollar's impact on exports.

"It suggests the challenging environment for manufacturers is continuing," Mr Sam Bullard, a senior economist at Wells Fargo Securities, said before the report. "It's not as if the clouds over the outlook have lifted to give us more clarity on the US and global demand."


A version of this article appeared in the print edition of The Straits Times on September 02, 2016, with the headline 'Euro area PMI dips; US sees contraction'. Subscribe