Eurozone manufacturing activity witnessed continued contraction in August, driven by a downturn in factory output and a significant decline in new orders.
The HCOB final manufacturing Purchasing Managers' Index (PMI) registered 45.8 in August, remaining consistent with June and July's figures. Revised data from S&P Global indicated an upward adjustment from 45.6.
This score underscored another substantial deterioration in operating conditions, maintaining its position below the critical 50.0 mark since July 2022.
"Things are going downhill, and fast," remarked Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.
"The manufacturing sector is entrenched in a slump, with business conditions worsening at a steady rate for the past three months, propelling the recession to a grueling 26-month span," de la Rubia continued.
Manufacturing activity was adversely affected by a marked contraction in new orders, with total sales experiencing the steepest decline this year. Additionally, there was a noticeable drop in new export business.
The sharp downturn in sales heightened manufacturers' reliance on backlogs to sustain production. Outstanding business volumes diminished at the fastest rate since February.
The survey revealed a significant reduction in purchasing quantities, a contraction in input volumes held as stock, and a decrease in inventories of finished products.
Employment levels further declined midway through the third quarter, extending the ongoing trend of job cuts to 15 months. Manufacturers' expectations for output growth in the coming year were at their lowest since March.
Manufacturers also reported a rise in overall input costs for the third consecutive month. Although input cost inflation slightly decelerated, it remained close to July's 18-month high. However, manufacturers increased their prices charged for the first time since April 2023.
Among the nations surveyed, Germany and France were the most significant drags on aggregated factory performance in August.
Conversely, Greece, Spain, and Ireland were the only countries to register growth, though the rates of improvement in Greece and Spain slowed.
Germany's manufacturing sector experienced sharp and accelerated declines in new orders and employment. The final manufacturing PMI declined for the third successive month, falling deeper into contraction with a five-month low of 42.4, down from July's 43.2. The preliminary score was 42.1. France's manufacturing sector witnessed a deepening downturn in August due to weak orders. The HCOB final PMI recorded 43.9, down from 44.0 in July, marking the most pronounced contraction in seven months and remaining above the preliminary estimate of 42.1.
Spain's manufacturing sector expanded in August, albeit at the slowest rate in the current expansion sequence, with the PMI slipping to 50.5 from 51.0 in July.
Elsewhere, Italy's manufacturing conditions deteriorated at a less severe pace in August, with the factory PMI improving to 49.4 from 47.4 in July.
