Manufacturing leads euro zone private sector contraction in Q3 2023

The reduction in manufacturing production was unchanged in September from the rapid pace seen in the previous month.

The Hamburg Commercial Bank (HCOB) flash euro zone manufacturing purchasing managers’ index (PMI) output index is at 43.4 today, without any change from the August value.

Barring a brief period of growth during the opening quarter of the year, euro area manufacturing output has decreased continuously since mid-2022, S&P Global said in a release.

Despite the weak demand environment, input costs continued to rise sharply, and the rate of inflation even picked up from that seen in August. Output prices, meanwhile, increased at the softest pace in over two-and-a-half years amid muted pricing power.

The seasonally-adjusted HCOB flash euro zone composite PMI output index posted 47.1 in September, up marginally from 46.7 in August, but still signalling a solid monthly decline in business activity as the third quarter drew to a close.

Output has now fallen in four consecutive months. For the second successive survey period, declines in output were seen across both monitored sectors as services activity decreased again.

Central to the latest reduction in business activity was a further deterioration in customer demand, as highlighted by a fourth successive monthly decrease in new orders.

Moreover, the fall in September was marked and the most pronounced since November 2020. Manufacturing new orders contracted rapidly again. New export orders declined even more quickly than total new business in September.

Euro zone businesses also signalled a waning of confidence in the year-ahead outlook at the end of Q3.

Manufacturing posted a seventh successive monthly drop in input costs. Manufacturing output prices fell at a marked and accelerated pace.

Germany and France were the key drivers of the overall downturn in activity during September.

Germany saw output decrease for the third month running and at a solid pace, albeit one that was slightly softer than seen in the previous survey period. Manufacturing production declined at the fastest rate since the opening wave of the COVID-19 pandemic.

The contraction in France was more stark, with activity decreasing to the largest extent since November 2020. Excluding pandemic-hit months, the reduction was the sharpest in over a decade. The rate of decrease quickened across manufacturing.

ALCHEMPro News Desk (DS)