London - The eurozone’s manufacturing sector slipped further
into decline last month as a downturn that started in the periphery appears to
be taking root among core members France and Germany, a survey showed on
Manufacturers in the eurozone cut workers at the fastest
pace in more than two years in April after new orders fell for the 11th
straight month, suggesting a gloomy outlook for the sector, which drove a large
part of the bloc’s recovery from the last recession.
Markit’s Eurozone Manufacturing Purchasing Managers’ Index
(PMI) dropped to 45.9 from 47.7 in March, slightly below a preliminary reading
and marking its lowest reading since June 2009.
It has been below the 50 mark that divides growth from
contraction for nine months.
“Manufacturing in the eurozone took a further lurch deeper
into a new recession in April,” said Chris Williamson, chief economist at data
The PMI’s output sub-index slumped to 46.1 from March’s 48.7
and below a flash reading of 46.4, chalking up a five-month low.
Earlier data from Germany, Europe’s largest economy, showed
its manufacturing sector contracted for a second successive month in April and
it was a similar picture in neighbouring France.
In Italy, the bloc’s third-largest economy, the sector
contracted for the ninth month while in Spain, facing deep government spending
cuts in an uphill battle to trim the public deficit, activity declined at the
fastest pace since June 2009.
“German manufacturing output showed a renewed decline,
attributed by many firms to weak demand from southern Europe.
"As such, it is
hard to see where growth will come from in coming months, unless export demand
picks up strongly from countries outside of the eurozone,” Williamson said.
But that may not happen anytime soon.
China’s HSBC PMI was below 50 for the sixth month running in
April while a purchasing managers’ survey for Britain, a major trading partner
of the eurozone which has fallen back into recession, showed UK
manufacturing barely expanded last month.
Data from the United States though was surprisingly upbeat
as the pace of factory growth picked up last month at a faster pace than any of
the 74 economists polled by Reuters had predicted.
Region in recession
Only a handful of economies in the 17-member eurozone are
still growing and the currency bloc as a whole is expected to languish in a
mild recession until the third quarter of this year, a Reuters poll showed last
Inflation though is seen dropping back to the European
Central Bank’s 2% target ceiling in the July quarter, which could give the ECB
room to support eurozone countries.
A Reuters poll taken last week suggests the ECB will restart
its government bond-buying programme within the next three months.
The ECB reactivated the bond-buying programme last August
after a four-month break when Italy and Spain began to get dragged into the eye
of the debt storm, but the programme is on hold at the moment.
The bank has also pumped more than €1 trillion of cheap
money into the banking system through two offers of cheap three-year loans, and
cut interest rates to a record low of 1.0% in December to stimulate growth
after raising them earlier in the year.
Despite the additional stimulus the PMI’s eurozone
employment index slumped to 47.6 in April, from 48.7 in March, its lowest
reading since February 2010 as firms slashed their workforces to contain costs.