Eurozone business activity contracted at an increasing rate in August 2023 as its flash composite purchasing managers’ index (PMI) output index fell to 47.0, its lowest since November 2020, reflecting a decline in both sectors. Manufacturing led the decline, recording a fifth successive monthly drop.

While the decline in factory output eased slightly, it remained strong. Demand conditions worsened, with new business inflows falling for a third consecutive month at the fastest rate since November 2020; goods orders fell sharply, according to a joint press release by S&P Global and Hamburg Commercial Bank.

Nationally, the steepest downturn was in Germany, with severe declines in manufacturing. France reported a third successive monthly drop, and the rest of the region saw a moderate decline, marking the first reduction since December.

Inflationary pressures picked up in August but remained weaker than seen in the past two years. Average prices charged increased for the first time in seven months, though goods prices fell for a fourth month running. Input cost inflation edged higher, linked partly to rising wage pressures.

Business confidence was further affected by the worsening order book situation and broader economic concerns, leading to companies’ expectations of output levels dropping for a sixth consecutive month. Manufacturers also scaled back input purchasing, reducing raw material inventories at a notable pace.

Hiring nearly stalled due to the falling demand and grim outlook for the year ahead. Employment almost halted in August, marking the smallest rate of job creation since pandemic lockdowns eased in February 2021. A marginal loss of manufacturing jobs was recorded.

The near stalling of hiring mirrored a sharp decline in backlogs of work, pointing to excess capacity relative to demand. Manufacturing backlogs fell for a 15th consecutive month.

Fibre2Fashion News Desk (NB)

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