European Manufacturing Sector in Sharp Decline

The data for the Eurozone in Q3 this year show a contraction of 0.1%, which is only an approximation of the real contraction because GDP figures include both productive and non productive activities. A better indication is provided by figures for the manufacturing sector. The Hamburg Commercial Bank Economics has released a survey of those figures for the EU and for Germany. The charts are merciless and show a consistent downturn, with occasional short-lived upturns. Nonetheless, the authors apparently prefer to convey a rosier perspective, and thus see a potential rebound coming – but not until some time next year.

“The Eurozone manufacturing sector’s trend over the last two years or so looks like a bumpy sleigh ride down into the valley. Given that that headline PMI [Purchasing Managers’ Index] barely moved over the last few months, including October, we may be about to reach the bottom of the valley. Thus, the big question is, when we will begin to make an ascent. The stagnating new orders index, which remains deep in negative territory, and the similar behaviour of the Quantity of Purchase Index do not suggest an immediate turnaround.”

And further: “The trajectory of Germany’s economy resembles a plane preparing for touchdown: decelerating its descent before landing at the bottom.”