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Eurozone factory downturn worsens

Eurozone factory downturn worsens
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Manufacturing in the eurozone contracted again in July, for the 11th straight month.

The latest survey of thousands of factories showed the manufacturing slump worsened in Italy, Spain and Greece, but also in the region’s two biggest economies – France and Germany.

The purchasing managers indexes (PMIs) produced from the surveys showed it was the same story in Britain where the PMI plummeted to a more than three-year low.

In China and India export orders were weak and factory output stalled. China’s official PMI slipped to 50.1, which was an eight-month low.

US manufacturing, meanwhile, contracted for a second consecutive month, according to the Institute for Supply Management’s index of national factory activity.

A separate report from Markit showed activity barely expanding and at its slowest pace in almost three years, partly
due to lower European demand for US products.

The eurozone data underline the scale of the region’s economic crisis and put more pressure on the European Central Bank to provide stimulus measures and stop a spiralling debt crisis that is threatening the euro.

ECB President Mario Draghi last week pledged to do whatever it takes to preserve the euro – within the Bank’s mandate.

But economists do not expect bold policy action from this month’s ECB policy meeting.

Ireland the exception

Spain, which slid deeper into recession in the second quarter, saw the 15th straight month of contraction, while Italy chalked up a year in negative territory.

The PMI for Greece, where the debt crisis began, has been below 50 since September 2009.

Even in once-booming Turkey, manufacturing activity contracted for the first time in four months.

The only bright spot was Ireland. It was the only euro zone country to show signs of emerging from the downturn, with its PMI above 50 (which is the division point between expansion and contraction) for a fifth straight month.

The grim news from Britain supports the view that the UK central bank, the Bank of England, will add further stimulus once its current 50 billion pound (63.5 billion euros) plan to buy government bonds with newly printed cash ends in November.

It even triggered speculation the central bank could step up its programme when its August policy meeting ends on Thursday.