According to the report from IHS Markit, the euro area manufacturing sector continued to contract during October. After accounting for usual seasonal influences, the IHS Markit Eurozone Manufacturing PMI recorded 45.9 in October. Although up from September’s 45.7 and the earlier flash reading, the index remained well below the 50.0 no-change mark to indicate a rate of contraction that was the second sharpest in the past seven years. All three market groups covered by the survey once again recorded a deterioration in operating conditions on the previous month. Investment goods and intermediate goods producers both registered marked contractions, compared to consumer goods where the rate of deterioration remained marginal. 

Against the backdrop of deteriorating order books, euro area manufacturers made further cuts to both their output and purchasing activity in October. Whilst rates of decline eased since September, they nonetheless remained historically marked. Firms also made notable inroads into their backlogs of work to extend the current period of contraction to 14 months. 

On the price front, average input costs fell the most since March 2016 during October. Commodities such as copper and steel, plus plastics, were amongst the inputs reported to be down in price. Manufacturers responded by making downward adjustments to their own charges for a fourth month in a row.

Finally, economic and political uncertainties (such as Brexit and US trade policy) continued to weigh on sentiment during October. Although expectations were at their highest for three months, confidence remained historically low.