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German manufacturing activity grows steadily in July – PMI

The eurozone’s manufacturing sector slowed in July, while Germany accounted for much of the growth that was recorded as activity declined in France, and edged toward stagnation in Spain and Italy, according to surveys of purchasing managers.

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An official survey on the services sector was more upbeat, showing growth accelerated to 53.9 in July from 53.7 in June. A reading above 50.0 indicates an expansion in activity, and a reading below that level a decline. Responses were collected between 12 and 26 July.

The latest economic data comes as the Bank of England’s Monetary Policy Committee (MPC) prepares to issue its latest interest rate-setting decision on Thursday.

All but three of 49 economists polled expect the BoE to cut interest rates by at least 25 basis points on August 4, but economists were divided on whether the Bank would restart its bond-buying programme.

“Expansions in output and employment are clearly being driven to a large extent by surging growth in Germany, while growth has nearly stalled in both Italy and Spain and contractions are being seen in France and Greece”, said Chris Williamson, IHS Markit’s chief economist.

He added: “The downturn was felt across industry, with output scaled back across firms of all sizes and across the consumer, intermediate and investment goods sectors, although exporters did report a boost from the weaker pound”.

“Demand seems to be supported by improved export performance, with some respondents still noting significant weakness in the domestic economy”, Barclays said.

He noted that the pound, which fell sharply against the euro and USA dollar after the vote to leave the European Union, had helped exports but made imports to the United Kingdom more expensive.

“Purchasing prices rose at levels not seen for half a decade, with SMEs bearing the brunt of rising input prices while larger corporates were more able to cope”.

The survey signalled that manufacturing employment had fallen for the seventh straight month in July.

“The drops in output, new orders and employment were all steeper than flash estimates”.

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Both surveys showed persistently weak demand at home and overseas were forcing companies to continue to shed jobs, even as Beijing vows to shut more industrial overcapacity that could lead to larger layoffs.

Employees work at the assembly line of a car manufacturing plant in Rajasthan