Slump in growth across eurozone 'signals economy is cooling down'
Published 02/09/2010 | 05:00
MANUFACTURING growth slipped in Ireland and elsewhere in the eurozone last month, adding to signs the economy is cooling after a second-quarter surge.
A gauge of manufacturing here fell back to 51.1 in August from 51.4 in July, although the measure still suggests the sector is expanding. Employment continues to be the main drag as companies fail to replace staff to reduce costs. It was the third month in a row that the indicator declined.
While manufacturers elsewhere in Europe reported that demand for exports was declining, Irish companies saw export demand rising despite weak new-order expansions.
New orders from abroad rose markedly, and at a faster pace than seen in July, according to figures published yesterday.
"Panellists indicated that higher new export orders largely reflected strengthening global demand and rather surprisingly, the US was mentioned in particular," said NCB economist Brian Devine.
"It is promising that Irish manufacturers continue to attract new orders from abroad as this will be key in driving the initial stages of the recovery.
"Ultimately, employment expansion will be required to push the recovery forward, but the evidence from the labour market is not promising for net employment growth until in to 2011."
The pattern was similar in two of Ireland's largest export markets, the UK and Germany, but not in the US where manufacturing growth unexpectedly surged last month.
In Europe, the gauge of manufacturing in the 16-nation euro region declined to 55.1 from 56.7 in the previous month. It was the 11th straight month with a reading above 50, which indicates expansion.
In the UK, which is Ireland's largest export market, manufacturing growth slowed to the weakest in nine months. It also fell in Italy and Spain but expanded in France. In Germany, the figure slowed but remained relatively high.
"Drilling down in to the national data highlights just how uneven the recovery remains. August saw France, Germany and Austria stay well ahead of a subdued chasing pack including Spain and Italy, while Greece remained firmly in the grips of a deep downturn," said Rob Dobson at data provider Markit.
Europe's recovery is "likely to remain bumpy and relatively gradual", added Howard Archer, an economist at Global Insight IHS in London. "While still pointing to decent manufacturing growth, the softer survey reinforces suspicion that eurozone manufacturers will find it increasingly difficult to sustain their impressive performance."
In the US, the gauge of manufacturing unexpectedly rose to 56.3 in August from 55.5 a month earlier, sparking hopes that the industry that led the recovery will save the US economy from a double-dip recession. Measures of production and employment increased.
"The manufacturing sector has maintained its momentum at least through August," said Zach Pandl, an economist at Nomura Securities in New York.
The report "makes clear the economy is not slipping into recession any time but it's still reasonable to be concerned about where we're heading over the next three-to-six months".
Construction spending in July fell twice as much as forecast, led by a slump in homebuilding that will depress economic growth, separate US Commerce Department figures showed yesterday.