Euro-Area Factories Remain Stuck in Downturn as Orders Slide

(Bloomberg) -- Manufacturers in the euro area remained firmly stuck in a slump last month as new orders slid and business confidence remained subdued.

A Purchasing Managers' Index for the sector fell to 47.6, down from 47.7 in May and worse than a flash estimate. The 50 level marks the difference between expansion and contraction.

The downbeat data is worrying as it signals no imminent end to the region's economic slowdown, which began more than a year ago. European Central Bank policy makers are readying more stimulus in case the situation doesn't improve, and IHS Markit, which releases the PMI report, sees signs that the weakness is impacting prices.

“Deteriorating inflows of new work meanwhile meant manufacturers increasingly focused on keeping costs down, notably by cutting staff numbers and warehouse stocks,” said Chris Williamson, chief business economist at IHS Markit. “The downturn is also increasingly feeding through to lower inflationary pressures, as producers and their suppliers compete on price to retain customers and generate sales.”

The deterioration in order books was brought about by a challenging economic environment, with global trade tensions and political uncertainties, and ongoing underperformance in the autos industry, IHS Markit said. A gauge for the service sector is due on Wednesday.

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