Recovery of eurozone manufacturing sector continues
By Michele Maatouk
Date: Tuesday 01 Sep 2020
(Sharecast News) - Activity in the eurozone manufacturing sector continued to recover in August from the impact of the Covid-19 pandemic and shutdowns.
IHS Markit's final manufacturing purchasing managers' index printed at 51.7, in line with the flash estimate and a touch below July's reading of 51.8. There were "marked" gains in output and new orders and confidence was at its highest for more than two years, but job losses continued at a strong pace.
The consumer goods category put in the best performance again, with "relatively modest" gains in the intermediate and investment goods categories.
In terms of countries, Italy was the standout performer, registering its best improvement in operating conditions for more than two years, while Ireland, the Netherlands and Germany all recorded solid improvements in operating conditions compared to July.
On the downside, however, manufacturing activity in France and Spain stagnated, while Greek manufacturing conditions deteriorated for the sixth month in a row.
Chris Williamson, chief business economist at IHS Markit said: "Eurozone factory output rose strongly again in August, providing further encouraging evidence that production will rebound sharply in the third quarter after the collapse seen at the height of the Covid-19 pandemic in the second quarter.
"Business expectations for output in a year's time also rose to the highest for over two years as prospects continued to brighten from the unprecedented gloom seen earlier in 2020.
"Caution is warranted in assessing the likely production trend, however, as so far it would have been surprising to have seen anything other than a rebound in output and sentiment. Worryingly, order book growth cooled slightly in August, and there are indications that firms are bracing for a near-term weakening of demand."
He noted that firms are taking a cautious approach to costs and spending, namely in respect to investment and hiring, amid continued worries about the strength of future demand and uncertainty over the course of the pandemic.
"Producers of investment goods such as plant and machinery reported the weakest order book growth, and job losses remained amongst the most prevalent since the global financial crisis," he said.
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