London - The eurozone’s manufacturing sector contracted for
the 11th straight month in July as output and new orders plummeted, a business
survey found on Wednesday.
The data, which showed the downturn is deepening its roots
in the core, will provide grim reading for policymakers who are battling to
contain a debt crisis that has raged across the continent.
Markit’s Eurozone Purchasing Managers’ Index (PMI) for the
manufacturing sector fell to 44.0, the lowest reading since June 2009 and below
a flash reading of 44.1 and June’s 45.1.
The output index sank to 43.4, the lowest since May 2009,
under June’s 44.7 and an earlier flash 43.6. Markit said it was in line with
the official measure of production falling at a quarterly rate of over 1%.
“The eurozone manufacturing sector’s woes intensified again
in July. Manufacturing therefore looks to be on course to act as a major drag
on economic growth in the third quarter, as the eurozone faces a deepening
slide back into recession,” said Chris Williamson at Markit.
After stagnating in the first quarter, narrowly avoiding a
technical recession, a raft of gloomy data pushed economists in a Reuters poll
last month to predict a contraction in the second and third quarters.
In a bid to spur growth the European Central Bank cut
interest rates to a record low of 0.75% in June and is expected to cut them
again to 0.5% before the year is out.
At its policy meeting on Thursday, it is expected to restart
its dormant government bond buying programme with the aim of lowering Spanish
and Italian government bond yields, which have reached levels unsustainable in
Bank President Mario Draghi vowed last week that “the ECB is
ready to do whatever it takes to preserve the euro”.
Earlier data from Germany, Europe’s largest economy, showed
its manufacturing sector contracted at its fastest pace in three years last
month and it was a similar story in neighbouring France.
Spain, which slid deeper into recession in the second
quarter, saw the 15th straight month of contraction, while Italy chalked up a
year in contractionary territory.
The PMI for Greece, where the debt crisis began, has been
below 50 since September 2009. Ireland was the only country to show signs of
emerging from the downturn, Markit said, where its PMI was above 50 for the
Factories across the eurozone cut prices at the fastest pace
since early 2010, but the new orders index still fell to 42.8 from the previous
month’s 43.5 and has only been lower once in over three years. New export
orders were at an eight-month low.
“The current weakness of global economic growth suggests
that all producers face a challenging environment in export markets as well as
at home,” Williamson said.
Some of the output was generated by firms running down
backlogs for the 14th consecutive month and workforces were cut for the sixth
month to reduce costs.
Unemployment across the bloc rose to a euro-era high of
11.2% in June, official data showed on Tuesday.