European manufacturing contraction slows

A survey suggests orders across Europe have dropped for the sixth month. Although less than before...

by Emma Haslett
Last Updated: 06 Nov 2012
New figures have shown that manufacturing across Europe fell for the sixth month in a row in January – an indication of just how bad things in the eurozone have become. But although Markit’s Purchasing Managers’ Index was still below 50, which denotes a contraction, it rose to 48.8, up from 46.9 in December. These days, that’s what passes for good news…

One problem with looking at an average figure for the whole of Europe is that it doesn’t really tell us much about how good or bad things really are. It helps to look at it more closely: in Germany, for example, the PMI rose as high as 51, its highest level in six months, which suggests the sector has actually grown. Debt-addled countries like Italy and Spain didn’t fare as badly as they previously have, either, with figures of 46.8 (the highest in four months) and 45.1 (the highest in five months) respectively.

The real worry was France, where the figure fell to 48.5, the seventh consecutive month on which it’s dropped. Although the fact that British defence manufacturer BAE Systems yesterday lost out to French rival Dassault on a $11bn (£7bn) contract to make an Indian government fighter jet should at least give France’s PMI a bit of a boost…

If you think France was bad, though, Greece was a disaster: its PMI fell to 41, which suggests that production there is falling faster than ever recorded. No surprises there, unfortunately.

On the whole, though, the fact that contraction in the sector has slowed ‘strengthens a shallow recession scenario’, said Markit. Ie. the likelihood is that while there will still be a recession, it’ll be less potent than some had anticipated. Good thing the euro isn’t about to fall apart. Doh…

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