Euro zone manufacturing growth slows again in September: PMI

[October 01, 2014]  By Rahul Karunakar

(Reuters) - Manufacturing growth in the euro zone slowed further in September as new orders contracted for the first time in over a year on dwindling demand at home and from abroad, a business survey showed on Wednesday.

Factories also cut prices last month for the first time since April, while preliminary data on Tuesday showed euro zone inflation slowed further in September to just 0.3 percent, the lowest since the height of the financial crisis.

That underscores the difficulty the European Central Bank is likely to have in bringing low inflation back up to its target of just below 2 percent, especially with low demand for goods and services in a stagnating economy.

Markit's final September manufacturing PMI came in at 50.3, the lowest since July last year and below both August's 50.7 and an earlier flash estimate of 50.5. It held above 50 that separates growth from contraction for the 15th month in a row.

"The euro area's manufacturing economy has lost the growth momentum seen earlier in the year, lurching closer to stagnation," said Chris Williamson, chief economist at Markit.

"Order books are now deteriorating for the first time since June of last year, suggesting output could start to fall as we move into the final quarter of the year."

The new orders sub-index, which measures demand, fell to 49.3 last month from 50.7 in August, and growth in new export orders slowed slightly.

That came despite the euro weakening to below its 2013 lows and down almost 9 percent from the peak it hit against the dollar in May.

After surprising markets with interest rate cuts last month and offering banks more cheap loans to boost lending, the ECB is due to give more details of its plan to buy repackaged loans after its monthly policy meeting on Thursday.

But after lackluster demand from banks last month for the ECB's first tranche of new long-term loans, a Reuters poll showed economists were unconvinced the latest measures will even work. They gave a 40 percent chance the central bank will eventually embark on a full-blown sovereign bond-buying program.

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