Factories in the eurozone recorded their worst month for almost six years in March, declining for an eight month and slipping deeper into contraction territory. IHS Markit’s March final manufacturing Purchasing Managers’ Index (PMI) reading dropped to 47.5 for the month, down from 49.3 in February, marking its lowest reading since April 2013. An index measuring output change, which feeds into a composite PMI due on Wednesday and is seen as a good gauge of economic health, sank to 47.2 from 49.4. This marks its lowest since April 2013 and the second straight month it has come in below the 50 level.
Any reading below 50 is a sign of contraction.
The manufacturing slide comes after European Central Bank (ECB) President Mario Draghi acknowledged eurozone growth worries as he confirmed the bank could further delay a planned increase in interest rates.
The ECB put off plans to “normalise” policy earlier this month, despite complaints from banks that negative rates are having a bad impact on lending.
Chris Williamson, chief business economist at IHS Markit, said: “Looking at the forward-looking indicators, downside risks have intensified, and the trend could clearly deteriorate further in the second quarter.”
Germany was among the worst performing across the eurozone, with the manufacturing sector in Europe’s largest economy contracting at its fasted rate since July 2012.
The PMI for manufacturing, which accounts for about a fifth of the economy, fell to an 80-month low reading of 44.1.
This is down from 47.6 in February and lower than the flash reading of 44.7.
It was the third successive month the index was below the 50.0 mark that separates growth from contraction.
IHS Markit’s Phil Smith said: “Both total new orders and export sales are now falling at rates not seen since the global financial crisis.
“More and more firms are reporting lower demand linked to Brexit, trade uncertainty, troubles in the automotive industry and generally softer global demand.”
New orders posted their steepest drop since April 2009.
Weakening exports have translated into a slowdown in Europe’s biggest economy, which posted its lowest growth rate in five years last year.
Mr Smith said: “Manufacturing output fell markedly and at the fastest rate since 2012, with the consumer goods sector joining intermediate and capital goods producers in contraction.
“The sustained solid growth in employment prior to March had been the sector’s one remaining bright spot, but the latest survey indicated a fall in jobs for the first time in three years amid reports from a number of firms that some temporary contracts weren’t being renewed.”
Meanwhile, manufacturing growth in the UK hit an unexpected 13-month high last month as the country braces for Brexit.
The PMI reading came in at 55.1 for March, above the 51 level forecast by economists polled by Reuters.
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