Manufacturing growth slowed in the eurozone at the start of 2016 as incoming orders showed no meaningful increase, even though companies cut prices steeply raising deflation worries.
Manufacturing growth in the eurozone slowed in January.
There was no meaningful increase in orders, even though companies slashed prices.
The information comes from surveys of thousands of factory purchasing managers around the region to create the Purchasing Managers’ Index.
The manufacturing PMI for the euro zone dropped to 52.3 from December’s 53.2. That was in line with an earlier flash estimate and still above the 50 mark that separates growth from contraction.
— Markit Economics (@MarkitEconomics) 1 fevereiro 2016
“The eurozone’s manufacturing economy missed a beat at the start of the year. Growth of order books, exports and output all slowed,” said Chris Williamson, chief economist at survey compiler Markit.
“If the slowdown in business activity wasn’t enough to worry policymakers, prices charged by producers fell at the fastest rate for a year to spur further concern about deflation becoming ingrained.”
The fact that manufacturers cut prices at the deepest rate for a year will be particularly disturbing for the European Central Bank’s policymakers.
It makes it much more likely they will introduce more stimulus in the near future.
Consumer prices rose by 0.4 percent last month. That is way short of the ECB’s inflation target of near 2.0 percent.
PMI data from the UK showed that British factories did enjoy a faster start to the year than expected, but companies cut staff at the fastest rate in three years and export orders fell despite the pound being weaker against other currencies.
Refering to the British statistics, Peter Dixon, an economist at Commerzbank said: “It wasn’t the best start to the year, but it wasn’t awful. Markets are pricing in a worst-case scenario and we are not seeing that yet.”
Stock markets, commodities and oil prices have been battered since the start of the year by concern the Chinese economy, the world’s second largest, is struggling.