A further slump in demand conditions sees the euro area manufacturing downturn deepen in October, with the headline reading being a 29-month low. Geopolitical uncertainty, high inflation and weaker economic conditions around the world weighed on foreign client spending with manufacturing output falling for a fourth straight month. S&P Global notes that:
“The eurozone goods-producing sector moved into a deeper decline at the start of the fourth quarter. The PMI surveys are now clearly signalling that the manufacturing economy is in a recession. In October, new orders fell at a rate we’ve rarely seen during 25 years of data collection – only during the worst months of the pandemic and in the height of the global financial crisis between 2008 and 2009 have decreases been stronger.
“Factors that are likely to aggravate the downturn include inflation , which remains stubbornly elevated despite continued evidence that supply-chain pressures are receding. Sentiment among manufacturing firms remained rooted in negative territory once again in October, suggesting that firms foresee these challenging conditions to stretch out long into 2023.
“Developments in the energy markets will remain a key focus for euro area manufacturers through the winter. The spate of mild weather across Europe so far bodes well and has helped bring wholesale gas prices down. However, we remain mindful of the risk that atypical cold weather could ramp up the need for energy rationing, causing widespread disruption to manufacturing production.”
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