Eurozone factory growth eased in August and may slow further, PMI shows

[LONDON] Manufacturing growth in the eurozone slowed during August and much of the expansion remained focused in the north, according to a survey that hinted at a further slowdown this month.

Germany, the Netherlands and Austria again provided the main power. Elsewhere, the picture was more subdued with France and Italy in decline, Greece stagnating and both Spain and Ireland enduring their worst growth spells since mid-2013.

Also clouding the outlook, Britain - which is outside the currency bloc - voted in June to leave the European Union. Most of the economic impact so far has been within Britain, but survey compiler Markit said reduced sales to the country were partly to blame for the order book slowdown.

"Eurozone manufacturers reported a wavering performance in August, with signs that growth could slow further in coming months," said Chris Williamson, Markit's chief economist. "There is some suggestion of a Brexit impact ... and growth may wane further in September after new orders growth slipped to a one-and-a-half year low."

Markit's Purchasing Managers' Index for the bloc dipped to 51.7 in August from 52.0, below a flash estimate of 51.8. An index measuring output also held above the 50 mark that separates growth from contraction, coming in at 53.3, below July's 53.9.

A sub-index measuring new orders fell to 51.4 from 52.2, its lowest reading since February 2015.

Of further concern to policymakers at the European Central Bank, who despite years of ultra-loose monetary policy have so far failed to get inflation anywhere near their 2 per cent target, factories offered deeper discounts to try and sell goods.

Eurozone inflation was stable at 0.2 per cent in August, against expectations of a slight rise, official data showed on Wednesday, adding pressure for the ECB to loosen policy again. But economists wonder just how much firepower the ECB has left.

REUTERS