- Prior 45.8
The manufacturing sector woes continue in the euro area, largely thanks to Germany. The region's backbone continues to see its industry suffer and that is weighing further on overall sentiment. Both new orders and output were seen declining at their fastest pace for the year, highlighting the issues plaguing the Eurozone at the end of Q3. HCOB notes that:
“It is a real shame that Spain is only the fourth-largest economy in the eurozone. While handling the global manufacturing downturn surprisingly well, Spain just does not have enough weight to lift the rest of the eurozone with it. The worsening industrial slump in Germany, for example, is too big for Spain’s momentum in September to make much of a difference. According to our nowcast model, eurozone industrial production will likely drop by around 1% in the third quarter compared to the last one. With incoming orders plummeting fast, we can expect another dip in production by year-end.
“The ECB will be pleased to see that purchase prices fell in September, especially after three months of rising prices. The drop in oil and natural gas prices helped bring down input costs, and companies passed some of that savings on to their customers. But let’s not get too comfortable – these price declines might not last. With the situation in the Middle East heating up, there’s always the chance that energy prices could spike again.
“What started as a slow trickle of job cuts in the middle of last year has now turned into a pretty significant reduction in employment. This will probably show up soon in the less timely official unemployment statistics, which have been fairly stable so far.
“It is not just falling demand that is hitting companies – they are also dealing with supply-chain headaches. This combination is pretty rare and, over the last 30 years, we’ve only really seen it during the pandemic. Typically, when demand drops, delivery problems tend to ease up. But this time, since June, the index tracking delivery issues has been dropping alongside new orders and for the first time since February, businesses are saying they are having to wait even longer for goods than they did in the previous month. The ongoing geopolitical tensions are obviously taking their toll here.”
