Eurozone manufacturing took another turn for the worse last month as output plummeted, hammering home the scale of the region’s economic crisis which also depressed export orders from factories in China and India.
Surveys of thousands of factories across the world released yesterday showed activity in the 17-nation euro zone contracted for the 11th straight month in July as a downturn that began in the periphery sinks deeper roots into the core.
The manufacturing slump worsened in Italy, Spain and Greece, but also in the region’s two biggest economies France and Germany, the purchasing managers indexes showed. Britain’s PMI plummeted to a more than three-year low.
In Asia‘s biggest economies China and India, which until recently had appeared more resilient to the effects of recession in Europe and disappointing growth in the United States, export orders were weak and output stalled.
But there was plenty of doubt over how much major non-Asian central banks meeting this week – the US Federal Reserve, the European Central Bank and the Bank of England – will or can do to turn the tide. Expectations are running high for another round of money printing from the Fed, although it probably will not happen until next month. The ECB may fall short of lofty market hopes at its meeting this week, with insiders telling Reuters bold policy action could be weeks away, while the bank is already in the middle of a money printing campaign.
Most of Europe‘s economies are sinking.
Markit’s Eurozone Purchasing Managers’ Index for the manufacturing sector fell to 44, well below the 50 level that divides growth from contraction. The reading was the lowest since June 2009, below the flash reading of 44.1 and June’s 45.1.
The output index sank to 43.4, the lowest since May 2009, also revised down from 43.6 and down from 44.7 in June. Markit said this pointed to production falling at a quarterly rate of more than 1 percent.
Across the channel in Britain, the manufacturing sector shrank at its fastest rate in more than three years, dealing a blow to hopes the country may come out of recession over the summer as it hosts the Olympic Games.
In the US, the Institute of Supply Management is expected to report later yesterday that its gauge of manufacturing popped back up above 50 in July after slipping to 49.7 in June on a slump in new orders.
Spain, which slid deeper into recession in the second quarter, saw the 15th straight month of contraction, while Italy chalked up a year in negative territory.
The PMI for Greece, where the debt crisis began, has been below 50 since September 2009. Even in once-booming Turkey, manufacturing activity contracted for the first time in four months.
The only bright spot was Ireland. It was the only eurozone country to show signs of emerging from the downturn, with its PMI above 50 for a fifth straight month.