Euro Area Manufacturing PMI Falls to Three Month Low

Markit’s manufacturing Purchasing Manager’s Index (PMI) for the euro area, has spiralled downwards to a three month low in May.

The index score reached 51.5, a decline from the 51.7 that was recorded for April, with the neutral index mark being classed as 50 on the scale.
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There was however expansions in six of the eight nations that were covered in the survey.

Only the Netherlands, who performed the strongest in the survey, and Germany in third place, reported faster growth, achieving their highest increases for two and four months respectively.

In contrast, Italy fell to a three month low in their manufacturing sector, while growth in Spain was at its weakest since October 2015.

And Ireland also fared badly, as this was their worst manufacturing PMI performance, going back all the way to July 2013.

France and Greece also posted contractions in their manufacturing sector, while Austria were the only country who remained unchanged month on month, with an index reading of 52.

Euro area manufacturing production in total has risen for the 35^th consecutive month.

Lacklustre rates of new business from domestic and export markets, were thought to be a major reason why the PMI had its second weakest reading since February 2015.

Only Germany, Italy, Spain and the Netherlands saw increases in new export business, although all reported slower expansions than what was found in April.

To combat the level of negative pressures from global competition, price discounting was evident in the survey.

Average selling prices fell for the ninth month running, with none of the participating nations in the survey reporting an increase.

Purchasing costs also were reduced for ten months successive months, although the rate of the decrease was at its lowest, since the sequence of lower buying prices began.

Employment in manufacturing rose again, albeit at a slower rate than over the 21 month expansion period of increases in the amount of industry positions.

Staffing levels rose in all of the nations covered except France and Greece, in France there was the deepest cut in manufacturing jobs since July 2014.

UK Manufacturing Uninspiring

Manufacturing in the UK remained subdued in May, climbing to 50.1 on the Markit/CIPS PMI index, only a slender rise from the 49.4 that was found in April.

Production volumes were broadly unchanged during the latest survey month, as the growth rate of new order inflows remained quiet.

Increases in fresh business opportunities were in the domestic market, while exports were reduced for the fifth consecutive month.

Softer global growth was partly to blame for this manufacturers believed, alongside challenging exchange rates, and ongoing client and market uncertainties.

The ambiguity that surrounds the manufacturing sector, was partly due to the forthcoming European Union (EU) referendum.

A third of the PMI respondents said that the upcoming vote on leaving the EU, has had a detrimental effect on their business.

Pound Collapses Amid ‘Brexit’ Concern  

The UK pound has taken a further tumble in the markets this morning GMT, as doubt over the economy has resurfaced, after opinion polls revealed that opinion appears to be shifting towards an exit from the EU.

Two polls for the ICM and The Guardian newspaper, disclosed that there is now a 52% -48% split in favour of the UK walking away from the EU, whereas most polls have found that the remain vote has edged clear.

The GBP/USD rate has fallen in favour of the greenback, with the pound currently buying $1.29, from $1.32 yesterday morning GMT.