Eurozone Manufacturing Expansion Strengthens In September

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Euro area manufacturing expanded at a faster rate in September, largely led by the growth in Germany, while rising coronavirus infections pose a threat to the outlook.

The seasonally adjusted Eurozone Manufacturing PMI rose to 53.7 in September from 51.7 in August, latest survey data from IHS Markit showed on Thursday, confirming the flash estimate released earlier.

A reading above 50 suggests growth in the manufacturing sector.

The euro area manufacturing sector has grown for three months in a row and the September growth marked the strongest expansion in over two years.

Germany led the improvement in September with the PMI reading hitting a 26-month high of 56.4, slighlty below the flash reading of 56.6.

Italy followed with a 27-month high reading of 53.2. French, Spanish and Austrian manufacturing PMIs hit two-month highs of 51.2, 50.8 and 51.7, respectively.

In the Netherlands, manufacturing growth was the strongest in seven months with a PMI reading of 52.5. Manufacturing stagnated in Greece and Ireland.

Growth in the investment goods industry was the strongest in over two years. Consumer and intermediate goods categories registered solid improvement in operating conditions in September.

Output and new orders grew robustly in September and the pace of growth in both was the strongest in over two-and-a-half years.

Export orders grew for a third straight month and the sharpest rate since February 2018. Though backlogs were the highest in nearly two-and-a-half years that did not prevent further job losses. Employment decreased at the slowest rate since February.

Purchasing activity increased for the first time in nearly two years. Input costs rose slightly, while output prices fell for the fifteenth month in a row, thanks to competitive pressures and a still fragile demand environment. Business confidence was the highest since April 2018.

“Divergent export performance explains much of the difference between national production trends, with Germany the stand-out leader in terms of growth in September, led by a strengthening of demand for investment goods such as plant and machinery,” IHS Markit Chief Business Economist Chris Williamson said.

“Without a more broad-based recovery, the sustainability of the upturn looks at risk, with additional worries fueled by rising Covid- 19 infection rates,” the economist added.

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