In recent figures released by Markit Manufacturing PMI, the index has fallen from 50.4 in July to 49 for the month of August. This is adding new worries for the recovery of the Eurozone as anything under 50 is considered to be a contraction in the market.
Citing a weakening German economy that is on the verge of stalling, Market noted that Germany has been the Eurozone’s strongest economy, its main engine, to date. However, Germany’s slowed production in the manufacturing sector is only one of the worries facing economic recovery in the Eurozone.
Of the 17 countries, orders fell in each and every one of them. August recorded the lowest figures in over two years in manufacturing and new job creation was at its lowest point for just about one year. Unsurprisingly, even though Germany’s production was down, they are the strongest nation in the manufacturing sector coming in at 50.9. Equally unsurprising is the fact that Greece came in last with 43.3 being reported for the monthly index.
According to data released 1 September, Spain, Italy and France have also contracted as has the UK which is outside the Eurozone. Chief economist at Markit, Chris Williamson, is on record as saying that the final August PMI data is worse than had been thought whilst watching the flash numbers. He believes this signals an end to the small but apparent manufacturing recovery that began in 2009.
What is most worrying is the fact that Germany, their strong state, saw the greatest and fastest drop in new orders for exports. This is significant in that the Eurozone will not be able to rely on the growth of its largest member that traditionally has an export driven growth. Other member states have been relying on Germany to sustain their weak recovery, but this does not bode well for the near future based on PMI data for the month of August.
