Activity in the eurozone’s manufacturing sector picked up very modestly in October, but largely because businesses cut their prices, an indication that the currency area is unlikely to soon escape a period of very low inflation.
Surveys of around 3,000 manufacturing companies released Monday also recorded weakness in many parts of the currency area, with activity declining in France, Italy, Greece and Austria.
The headline measure from data firm Markit’s monthly survey of purchasing managers at manufacturers rose to 50.6 from 50.3 in Sep. A reading above 50.0 for the Purchasing Managers Index indicates an expansion in activity, while a reading below that level signals a contraction.
The final measure was slightly below the preliminary estimate of 50.7 released in Oct.
Germany’s manufacturing sector returned to growth after a very slight contraction in Sep, but less decisively than first estimated, with the final PMI coming in at 51.4, below the 51.8 estimate.
However, what little growth there was across the eurozone came partly as a result of price cutting, while new orders fell for the second straight month, an indication that activity is unlikely to pick up significantly in coming months.
“It is hard to see any significant near-term boost to performance while market demand remains insipid and beset by lackluster domestic conditions, slowing export growth, and ongoing economic uncertainties,” said Rob Dobson, senior economist at Markit.
The European Central Bank’s governing council meets Thursday, but it isn’t expected to take any further action to boost growth and inflation. The central bank cut its key interest rates in June and September, and has launched a program of cheap loans for banks as well as purchases of covered bonds. It will start to buy asset-backed securities this month.