Euro zone manufacturing economy sharply contracts in Q3 2023: Survey

The latest Hamburg Commercial Bank (HCOB) manufacturing purchasing managers’ index (PMI), compiled by S&P Global, fell fractionally to 43.4 in September, from 43.5 in August.

New orders continued to shrink at a pace that has rarely been surpassed since the survey began in 1997.

Crucially, this marked the fifteenth successive month in which the headline index has recorded in sub-50.0 territory, thereby indicating a sustained deterioration in the health of the euro area manufacturing sector.

Although input costs fell sharply yet again, businesses’ efforts to retrench further were evidenced by sustained reductions in employment, purchasing activity and inventories. Subsequently, production cutbacks were extended in September, S&P Global said in a note.

Meanwhile, there was a considerable softening of business confidence, with growth expectations slumping to a ten-month low.

Euro zone manufacturers reduced their prices charged for a fifth successive month and to one of the greatest extents seen in 14 years to boost competitiveness and stimulate demand.

Barring Greece, all other countries monitored registered downturns during September. Germany and Austria continued to observe the fastest rates of decline, followed by the Netherlands and France. In the case of the latter two, September’s contractions were the steepest seen in almost three-and-a-half years.

While Italy and Spain also saw worsening manufacturing sector health, the rates of deterioration slowed.

Considerable weakness was also seen on the export front. The response by manufacturers was to reduce production levels for the fourteenth time in 16 months. The decrease was sharp and slightly faster than in August.

In the absence of demand pressures, eurozone manufacturers made further progress on their backlogs of work.

A further decrease was observed in euro zone factory operating expenses. The reduction was steep overall, despite easing to the slowest since April. Lower input prices continued to provide firms with more flexibility over their pricing strategies.

ALCHEMPro News Desk (DS)