Euro Manufacturing Output Contracts - Europe Heads Toward Recession

Euro-area manufacturing contracted more than initially estimated in August, suggesting the economy may struggle to avoid a recession in the third quarter.

A gauge of manufacturing in the 17-nation euro area based on a survey of purchasing managers was revised lower to 45.1 from the reading of 45.3 estimated earlier, London-based Markit Economics said today. The index, which stood at 44 in July, has held for 13 months below 50, indicating contraction. European manufacturers are feeling the impact of the sovereign-debt crisis and tougher austerity measures that have undermined export and consumer demand. Euro-area economic confidence fell to a three-year low and inflation accelerated to 2.6 percent in August. The jobless rate held at a record 11.3 percent in July.

“The euro-zone manufacturing sector remains firmly in contraction territory,” Rob Dobson, senior economist at Markit, said in the report. “The rate of decline was a little slower than in July, providing some heart that the manufacturing downturn may be easing, but the sector is on course to act as a drag on gross domestic product in the third quarter.” Read more >>