Pace of decline accelerating

The industrial sector across the Eurozone is in recession with Germany heading the pack due to the pace of its decline.

The industrial recession comes as the cost-of-living crisis and soaring energy prices send factories into their sharpest downturn since the early months of the pandemic. Demand collapsed last month, based on the purchasing managers’ index (PMI) survey from S&P Global with domestic and export orders slumping.

The PMI fell to 46.4, its lowest reading since the lockdowns of the first wave of COVID in 2020. Germany, the European Union’s biggest economy and most powerful industrial centre, suffered one of the steepest contractions with a PMI of 45.1.

The S&P Global survey shows that the pace of Germany’s industrial decline is accelerating with the initial “flash” PMI estimate of 45.7 just last week proving too optimistic, showing its factories’ prospects are deteriorating rapidly.

Any score below 50 shows a contraction in business activity, so the Eurozone experienced a deeper slump than September, when the PMI stood at 48.4, and the fifth consecutive monthly decline. S&P Global Market Intelligence senior economist Joe Hayes states that the survey is “now clearly signalling that the manufacturing economy is in recession”.

“In October, new orders fell at a rate we’ve rarely seen during 25 years of data collection – only during the worst months of the pandemic and in the height of the global financial crisis between 2008 and 2009 have decreases been stronger,” Hayes pointed out.

Hayes told The UK Telegraph that, “factors that are likely to aggravate the downturn include inflation, which remains stubbornly elevated despite continued evidence that supply-chain pressures are receding. Developments in the energy markets will remain a key focus for euro area manufacturers through the winter.”