PMI (Purchasing Managers Index) figures released today show a further slowdown in manufacturing activity for September. The PMI slipped to a 17-month low at 51.6, down from 52.2 in August and just 0.1 above its long-term average.
New order growth has slowed to near-stagnation, while price pressures remain subdued. Companies have reported weaker increases in production, new business and export orders. The average PMI reading for Q3 was also the weakest since Q2 last year and down sharply from figures seen earlier this year.
The weakness in the economic outlook of the Eurozone has weighed heftily on demand for UK manufactured goods, which saw the slowest growth of new export business in the current 18-month sequence of increase. In contrast to demand and output, job creation accelerated in September, regaining most of the momentum lost in August.
PMI figures suggest that Q3 figures will see a slowdown in UK manufacturing output compared to the earlier half of the year; ONS figures published yesterday showed that manufacturing output grew by a solid 0.5% from Q1 to Q2 2014 providing the largest upward contribution to production growth.
More grief for the Eurozone
The Eurozone PMI fell to a 14-month low in September reflecting protracted subdued economic activity in the Eurozone. The figure came at 50.3, down from 50.7 in August, as inflows of new orders contracted for the first time since June 2013. Input costs and selling prices were both lower than last month in the face of stubbornly low inflation throughout the Eurozone.
PMIs for Germany, Greece, France and Austria all came under 50.0 – indicating contraction in manufacturing activity. The German PMI fell below the 50.0 mark to 49.9 for the first time in 15 months as stagnant demand from the rest of the Eurozone and the Ukraine crisis were bound to take their toll.
Job creation came at a halt in September with higher headcounts in Italy, Spain and Ireland offset by lower employment in France, Austria and Greece. The lacklustre performance of the manufacturing sector suggests that output could start to fall in the last quarter of the year.
The Eurozone is set for some much-needed relief tomorrow as the ECB will announce the finer details of its ABS and Covered Bond purchase program.