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Eurozone PMI manufacturing finalized at 46.5, monetary policy could do little to address headwinds

Eurozone PMI Manufacturing is finalized at 46.5 in July, revised up from 46.4, down from June’s final of 47.6. Markit said output and orders were both down markedly as confidence hit lowest since December 2012. Also, there was sharpest recorded reduction in employment for over six years.

Looking at the member states, Germany PMI manufacturing hit 84-month low at 43.2. Austria hit 57-month low of 47.0. Italy and Spain recovered slightly to 48.5 and 48.2 respectively. Ireland hit 75-month low of 48.7. France hit 7 month low of 49.7.

Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The Eurozone PMI dashboard is a sea of red, with all lights warning on the deteriorating health of the region’s manufacturers. July saw production and jobs being cut as the fastest rates for over six years as order books continued to decline sharply. Prices fell at the sharpest rate for over three years as firms increasingly competed via discounting to help limit the scale of sales losses.

“Forward indicators also deteriorated. Input buying fell to an extent not seen since 2012 as firms prepared for weaker production in the short term, and expectations for the year ahead likewise fell to the lowest in over six-and-a-half years.

“The downturn is being led by Germany, reflective of a further worsening conditions in the auto sector and falling global demand for business equipment. However, output is also falling in Italy, France, Spain, Ireland and Austria and is close to stalling in the Netherlands. Greece notably bucked the deteriorating trend.

“Rising geopolitical concerns, including trade wars and Brexit, and worries about slower economic growth both domestically and internationally were all widely reported as having subdued current demand and hit confidence in the outlook. The concern is that, while policymakers have become increasingly alarmed at the deteriorating conditions, there may be little that monetary policy can do to address these headwinds.”

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