Eurozone Manufacturing PMI Hits Two-Year Low

Eurozone manufacturing activity fades

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Eurozone manufacturing PMI declined to 53.3 in September, its lowest level in 2 years.

According to IHS Markit - compilers of the data - manufacturing growth was subdued by export orders stagnating for the first time in over five years.

The decline in manufacturing means Eurozone business activity grew in September at
the second-weakest rate since late-2016.

New order inflows were the joint-weakest since October 2016 and backlogs of uncompleted orders rose at the slowest rate since September 2016.

"The sentiment across euro area firms is on a downward trend," says  Andreas Wallström Chief analyst at Nordea Markets. "Further declines should be expected."

While the manufacturing sector is weakening other parts of the economy are seen to be holding up a little better.

The composite indicator, weighing together manufacturing and services sector, declined much less and remains on a high level at 54.2. The services PMI read at 54.7, ahead of expectations for growth of 54.4.

Nordea Markets say the data is consistent with Eurozone GDP growth at 2.0% year-on-year. This is in line with the European Central Bank's estimates for growth of 2.0% in 2018 and 1.8% in 2019.

Eurozone data therefore remains consistent with ECB expectations and should not derail plans to end quantitative easing in December and the planned raising of interest rates towards September 2019.

This explains why the Euro exchange rate gave a shrug to the data.