The combination of a weak dollar and a strong euro is taking its toll on manufacturers in the euro zone. The latest survey of purchasing managers in the region shows there has been a sharp slowdown in the pace of output growth, thanks to the competitive edge the US gets from the currency imbalance. The Reuters Eurozone Purchasing Managers Index has just recorded its biggest fall since the terror attacks of September 11 2001. It slumped from 52.4 in October, to 50.4 last month.
By contrast, manufacturing in Britain continues to storm ahead. The UK purchasing managers index rose to 55 last month from 53.5 in October. Exporters there are being helped by the pound’s weakness against the euro. The economists who compile the data say there are two problems. Firstly, goods from the euro zone are become more expensive for people in other countries to buy. And European consumers find imports are relatively cheaper compared with domestically produced goods. That has hit Germany and Italy particularly hard as domestic demand is already weak there. The purchasing managers’ survey shows that manufacturing contracted in those two countries in November for the first time in over a year.