Euro zone factory activity contracted sharply last month as demand was again whacked by a trade war being waged by the United States and by the continued lack of clarity over Britain’s departure from the European Union, a survey showed. IHS Markit’s final manufacturing Purchasing Managers’ Index (PMI) was 45.9, barely above September’s seven-year low reading of 45.7 and its ninth month below the 50 mark separating growth from contraction.
An index measuring output, which feeds into a composite PMI due on Wednesday that is seen as a good barometer of economic health, rose to 46.6 from September’s near seven-year low of 46.1. Euro zone manufacturing remained stuck in its steepest decline for seven years in October, meaning the goods producing sector is on course to act as a severe drag on GDP again in the fourth quarter, said Chris Williamson, chief business economist at IHS Markit.
“Geopolitical concerns, ranging from Brexit to US trade policy, continue to create uncertainty, further dampening demand both at home and in export markets. An index measuring new orders rose to 45.3 from 43.4 but spent its 13th straight month below the breakeven mark. Other forward-looking indicators in the survey suggest there won’t be any turnaround soon, despite factories cutting their prices for a fourth month in October.