UK and eurozone PMI disappoint

Manufacturing growth in the eurozone has hit a 13-month low in August while the purchasing managers index in the UK has also fallen to its lowest level in 14 months.

Data released today by Markit Economics shows the purchasing manager’s index in the eurozone dropped back to 50.7 during the month of August compared with 51.8 in July, marking the fourth consecutive month of slowing PMI in the currency bloc.

The fall in the index sees eurozone PMI stray closer to negative territory marked by a figure below 50.

A decrease in both new orders and new export business is said to have driven what Markit describes as a “broad slowdown” in PMI across much of the eurozone, except in Ireland which stands out as a “bright spot” with PMI hitting a 176-month high.

The eurozone’s leading economy Germany also saw PMI slow to an 11-month low of 51.4 while France remains a “real concern” after its manufacturing sector contracted at the quickest pace since May 2013.

Markit expects this latest sign of a slowdown in the eurozone economy could put extra pressure on the European Central Bank to bring in quantitative easing at its next meeting to be held this Thursday. It says: “The slowdown in industry is likely to add further fuel to the fire for analysts expecting additional monetary or fiscal stimulus to be implemented.”

Separate data also issued today by Markit and the Chartered Institute of Purchasing & Supply shows manufacturing also slowed in the UK during the month of August.

The UK purchasing manager’s index fell to 52.5 in August down from 54.8 in July, marking a record low since June 2013.

Markit and CIPS point out that although the manufacturing sector is still showing “a reasonably solid” rate of expansion, “signs of a slowdown have become increasing evident in recent months”.

Markit senior economic Rob Dobson also highlights the impact of geopolitical tensions on UK exports. He says: “It is also becoming increasingly evident that UK industry is not immune to the impacts of rising geopolitical and global market uncertainty, especially when they affect economic growth and business confidence in our largest trading partner the eurozone.

“It is noticeable that where export orders were reported to have risen, companies mainly linked this to demand from North America, Asia and the Middle East, as opposed to our European partners.”