Europe’s factories sputtering at seven-year low
Manufacturing survey shows Germany mired in weakness as jobs go at fastest pace since 2013
Activity in European factories barely improved in October, according to a monthly survey by IHS Markit. Geopolitical forces such as the US-China trade war hit powerhouse Germany particularly hard, keeping growth at its weakest in seven years and forcing manufacturers throughout the region to cut jobs at the fastest pace since 2013.
IHS Markit’s final eurozone manufacturing survey edged up to 45.9 in October, from an initial 45.7 for last month and from September’s final 45.7. A reading of 50 separates contraction from expansion in industrial activity.
Chris Williamson, chief business economist at IHS Markit, said the survey data were consistent with industrial production falling at a quarterly rate in excess of 1 per cent. “Geopolitical concerns, ranging from Brexit to US trade policy, continue to create uncertainty, further dampening demand both at home and in export markets,” he said.
“The focus of manufacturers remains on cost cutting, reducing inventories and investment spending while also lowering payroll numbers at an increased rate. The steeper pace of job losses is especially worrying, as it magnifies the risk of the downturn spilling over into the household sector.”
A separate IHS Markit survey showed construction in Britain fell for a sixth consecutive month in October, as uncertainty over the political backdrop kept building activity near its weakest since the depths of the global financial crisis in 2008-09.
Across the eurozone, a steep drop in new orders was a key driver of broader weakness, IHS Markit said. Germany, Europe’s largest economy, experienced sharp declines in export orders and employment in the German factory sector saw its largest volume of job cuts in a decade.
The European Central Bank has cut interest rates into negative territory and restarted a multi-trillion monetary stimulus programme to try to prop up growth in the flagging euro zone economy. But with producer prices falling and manufacturers shedding jobs, incoming bank president Christine Lagarde is taking over tat a particularly difficult juncture, Williamson said.