Eurozone manufacturing sector contracts with Germany shrinking fastest

The Eurozone’s manufacturing sector saw its biggest contraction for nearly six years in March, according to a widely-watched report, with key producer Germany registering the biggest fall.

The Eurozone manufacturing purchasing managers index (PMI) fell to a score of 47.5 in March, down from 49.3 in February, as demand and output slumped, statistics from data company IHS Markit today revealed. A score of below 50 marks a contraction.

In European powerhouse Germany the manufacturing PMI fell to 44.1, its lowest score since July 2012, as a decline in order books gathered pace. In Germany both total order books and new business from abroad fell at the fastest rate since April 2009.

Chris Williamson, chief business economist at IHS Markit said: “Concerns over trade wars, tariffs, rising political uncertainty, Brexit and – perhaps most importantly – deteriorating forecasts for the economic environment both at home and in export markets, were widely reported to have dampened business activity and confidence.”

March’s reading was the second month in a row that the PMI figure has been below the 50.0 no-change mark, with the region’s three biggest economies – Germany, France and Italy – all posting below the 50.0 mark.

The PMI has been on a broadly downward trajectory since reaching a series record high at the end of 2017.

After improving in the first two months of 2019, business conditions in France's manufacturing sector deteriorated in March as it registered a score of 49.7, meaning a slight contraction. Italy’s PMI score dropped to a near six-year low.

In Greece, Ireland, the Netherlands and Spain, however, the manufacturing PMI grew in March.

March’s fall in demand and output depressed business confidence in the Eurozone in March. Optimism about output in 12 months’ time hit its lowest level since December 2012, with German manufacturers leading the fall in confidence.

Michael Hewson, chief market analyst at CMC Markets UK, said of the Eurozone data: “This is quite a worrying trend for a region where the only real expansion has come about as a result from a central bank that has only just stopped its asset purchase program, and is set to launch a new loan program in September.”

He said: “Against such a backdrop it is hard to imagine that the EU would countenance a no deal Brexit. It would be an economic shock of a magnitude that would do immense damage to both sides.”