Research firm Markit reports and Eurozone PMI remained weak in August. The data show that most of Europe has dropped into a double dip recession. It raises the issue of whether weak economies like Spain can meet austerity goals as their economies contract. It also begs the question of what a  bailout of several nations would cost and whether powerful Germany will support them. An FT polls recently taken shows little voter support for aid.

The firm reports:

The Eurozone manufacturing sector contracted for the thirteenth successive month in August. At 45.1, up from July’s 37-month low of 44.0, the final Markit Eurozone Manufacturing PMI came in below the earlier flash estimate of 45.3. Business conditions deteriorated in the vast majority of the national manufacturing sectors covered by the survey. The sole exception was Ireland, although even here the rate of expansion was less marked than one month ago. Downturns
in Germany, France, Spain, the Netherlands and Greece all eased during August, but accelerated in Italy and Austria. Greece remained rooted to the foot of the Eurozone PMI league table.

Turning to the figures by nation in Germany:

The final seasonally adjusted final Markit/BME Germany  Purchasing Managers’ Index (PMI)posted 44.7 in August, up from a 37-month low of 43.0 during July. Although the latest reading was still below the neutral value, thereby pointing to an overall deterioration in business conditions, it was the first month-on-month rise in the PMI since January. The headline PMI reading is a composite index designed to give a snapshot of operating conditions in the manufacturing economy, with the rise since July mainly reflecting slower reductions in output, new business and employment.

In France:

The downturn in France’s manufacturing sector eased during August. The headline  Purchasing Managers’ Index (PMI) – a seasonally adjusted index designed to measure the performance of the manufacturing economy – posted 46.0, up from 43.4 in July. The latest  reading was the highest since April, albeit still indicative of a marked pace of deterioration in overall operating conditions.

In Italy:

Italy’s manufacturing sector remained deep in recession during August, as highlighted by the seasonally adjusted Markit/ADACI  Purchasing Managers’ Index (PMI) – a composite indicator designed to provide a single-figure snapshot of manufacturing performance – falling to a ten-month low of 43.6, from 44.3 in July. Factors that weighed on the headline number were faster contractions in output, new business and employment, as well as a more marked improvement in supplier delivery performance.

And, Spain:

The Spanish manufacturing sector remained in contraction in August as output, new orders and
employment all continued to decrease. Input prices rose for the first time in three months, but firms continued to lower their output prices. Meanwhile, ongoing falls in production requirements led to a further drop in purchasing activity.he seasonally adjusted Markit Purchasing Managers’ Index (PMI) – a composite indicator designed to measure the performance of the manufacturing economy – remained well below the 50.0 no-change mark, posting 44.0. That said, the index rose from 42.3 in the previous month, and pointed to the weakest deterioration in business conditions since March.

Douglas A. McIntyre

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