The Reuters Eurozone Purchasing Managers Index – an overview of manufacturing conditions in the eight largest European economies (Austria, France, Germany, Greece, Ireland, Italy, The Netherlands and Spain) within the twelve-nation euro currency zone – fell in September signalling a decline for the first time since February in the health of the manufacturing sector.

The PMI dropped for the third month running, down from 50.8 in August to a seven-month low of 48.9. Any reading below the 50.0 indicates a deterioration on the previous month. The PMI was dragged down as manufacturing output and order books both fell for the first time since January and the rate of job losses in the sector gathered pace.

Key points from the September report are:

Manufacturing Output
The seasonally adjusted Manufacturing Output Index dipped below the 50.0 no change mark in September to indicate the first contraction of production since January. The index dropped from 52.5 in August to 49.1 in September. The decline was driven by falling output in Germany, where a particularly sharp contraction of output was recorded. Output rose in all other main Eurozone economies although, with the exception of Ireland, the rate of increase slowed in all cases. Moreover, in both Spain and the Netherlands only marginal growth of output was registered. The strongest growth was seen in Greece, followed by Ireland.

New orders
The New Orders Index decreased from 52.1 in August to 49.6 in September, dropping below the 50.0 neutral level to signal the first contraction of new orders since January. Order books fell steeply in Germany, but also to a lesser extent in the Netherlands. All other economies recorded growth of orders in September, though growth in both Spain and France weakened to shown only a marginal rise during the month. The strongest growth in order books was seen in Greece, yet even here the pace of growth was considerably lower than the recent peak seen in May.

EmploymentSeptember’s Manufacturing Employment Index indicated a decline in employment for the sixteenth consecutive month. Furthermore, the index fell from 47.4 in August to 46.7, registering the second successive monthly increase in the rate of net job losses and the fastest rate of decline since February. Employment fell in all countries except Greece, where only a modest rise in staffing levels was recorded. The fastest rate of decline was seen in the Netherlands, followed closely by Germany and then France.

Stock Inventories
Destocking policies, linked to weak sales, caused stocks of finished goods to continue to fall in September. But the decline was only modest due to the unplanned build up of stock in some companies.

Input PricesManufacturing input prices rose in September, but the increase was the weakest since April. Upward input cost pressures have eased significantly since the eighteen-month peak seen in July. The index fell from 55.2 to 54.7 in September, largely due to the shift to a buyers’ market for various commodities as demand for raw materials fell. The quantity of goods purchased by manufacturers declined for the first time since February as purchasing managers focused on efficient stock control. Stocks of purchases fell at the fastest pace since April.

Delivery Times
Suppliers’ delivery times lengthened for the sixth month running in September, but the incidence of delays remained only modest and reflected few capacity constraints, due largely to the decline in purchasing activity during the month. The index rose to a four-month high of 48.7.

The Eurozone Manufacturing Indexes are compiled by NTC Research and sponsored by Reuters. They are based on data collected from purchasing executives in around 2,500 companies in Germany, France, Spain, Italy, Ireland, Greece, Austria and the Netherlands- which together account for an estimated 92% of Eurozone manufacturing activity.

Data sourced from: NTC Research; additional content by WARC staff