The “Fierce” Slowdown in Manufacturing Will Act As a Major Obstacle to the Economy of the Eurozone

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The Eurozone suffered its third consecutive month of contraction in its manufacturing sector in April, according to revealed data today.

Germany continued to lead the slowdown, as the bloc’s manufacturing industry barely recovered from a minimum of six years in March, according to a closely monitored measure of activity.

The manufacturing sector rose slightly from the March measure of 47.5 to 47.9 last month, showing the manufacturing purchasing managers (PMI) index of IHS Markit in the Eurozone. Anything below 50 shows a contraction.

Germany’s manufacturing industry suffered a “sharp decline,” IHS said, while contractions in Austria and Italy’s decline rates “were marginal.”

New orders received by Eurozone manufacturers were hit by another sharp drop in April, although not as low as March’s 75-month low, while exports fell similarly in the face of weak demand.

Chris Williamson, a chief business economist at IHS Markit, said: “The manufacturing sector remained in deep decline at the beginning of the second quarter.” He warned that the goods-producing sector could “act as a major obstacle” to the economy in the second quarter of 2019.

“The slowdown is still the most  fierce in Germany, with Italy and Austria also in decline and France stagnating. The expansion of Spain is still only modest, “he added.

While the four largest members of the Eurozone saw PMI rise from their March lows, Williamson said it was “too early” to call this a turning point.

“Surveys continue to see widespread concerns about weak global demand, as well as reports of companies struggling amid rising trade protectionism, Brexit and the moderate automotive sector,” he said. However, the euro changed little, falling from 85.88p to 85.70p before rising again to 85.83p.

Kit Juckes, of Societe Generale, said: “The reaction to GDP data in the Eurozone still suggests that there is too much pessimism about growth, which is holding back the euro.”

“However, the outlook is not bright enough either to justify a large upward movement.”

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