Monday, July 07, 2003

Eurozone Manufacturing Continues to Contract

More bad news from Germany and the euozone generally, just to get the day started:

The eurozone manufacturing sector contracted at a faster pace in June, hit by the recent strength of the euro, a survey indicated on Tuesday.The Reuters eurozone purchasing managers' index slipped from 46.8 in May to 46.4 in June, worse than analysts had expected and the strongest rate of decline in seventeen months. A score of 50 distinguishes expansion from contraction.

The survey said the result reflected a faster rate of decline in manufacturing output and new orders, as well as a "marked reduction" in staffing levels. "The strength of the euro against the US dollar was again reported to have hit exports, but helped to push down input costs via cheaper imported raw materials," the survey said.

The output index fell from 48.6 in May to 48.1 in June, the third month in a row that production has fallen. Hardest hit were Ireland, the Netherlands and Germany, although the latter saw the pace of contraction ease slightly. In contrast, output continued to grow in Spain, Austria and Greece. Order books fell again in June at the fastest pace since December 2001, primarily because exports were hit by the strength of the euro. Worst-affected was Germany, although all eurozone countries bar Greece and Austria say order books decline.

Employment in the manufacturing sector also fell for the 25th consecutive month, although the pace of contraction slowed slightly: the index rose from 45.2 in May to 45.6 in June. Input cost inflation was dampened by excess capacity in manufacturers' supply chains. Average input prices fell, partly because of lower oil prices, but also because the strong euro had led to cheaper imported raw materials.
Source: Financial Times

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