(RTTNews) - Confirming the weakness in Eurozone manufacturing activity, the Purchasing Managers’ Index for the sector stood below the neutral level for the third straight month in August.

The Markit manufacturing PMI for August stood at 47.6, up from the flash estimate of 47.5. A reading above 50 indicates expansion, while a reading below that suggests contraction. The PMI remained below the critical level for the third month in a row, reflecting further decrease in production, new orders and employment. The index remained below the 50-mark all the big-four Eurozone nations.

Output as well as new business recorded a decline in capital, consumer and intermediate goods purchasing sectors. Nearly all the national manufacturing surveys reported lower production. Ending thirty-five months of continuous expansion, Germany registered a decline in production. Meanwhile, France and Spain showed the sharpest contraction in production. The Italian production also remained on the downside.

Commenting on the PMI data, Markit Chief Economist, Chris Williamson said, “The final PMI data point to an increasingly broad-based downturn within euro area manufacturing, with weakness spreading to Germany and even investment goods producers, who have provided the back-bone to Eurozone growth in recent years.”

The weakness was characterized by a marked decrease in the incoming new business volume. Spain and France showed the deepest contraction in new orders. In Germany, new work dropped at the fastest pace in more than five years.

New export orders received by the manufacturers also decreased in August. Among the big-four nations, Germany and Spain showed the largest reduction in export orders. Employment also slid in August, with Spain showing the highest fall. Inflation of average purchase prices stayed at elevated level as fuel, energy and commodity prices remained high. But, the input cost inflation slowed slightly from a forty-five month high recorded in July.

Further, the survey noted that the contraction in outstanding business reached a record low for the second straight month.

According to the survey results of Markit Economics and BME, the manufacturing PMI for the largest Eurozone economy dropped to 49.7 in August, which was the lowest level in three years. The flash estimate for August was 49.9. Job creations in Germany were the weakest in two-and-a-half years.

The contraction of French manufacturing sector gathered pace, with the manufacturing PMI dropping to the weakest since January 2002, the Markit/CDAF survey showed. The indicator now stands at 45.8, down from July’s 47.1. The initial estimate was 45.1 for August.

The Markit/ADACI survey showed that the Italian manufacturing PMI climbed to 47.1 in August from 45.3 in July. The Italian manufacturers experienced tough operating conditions as output and new orders declined in August.

The Spanish manufacturing PMI, reported the third lowest level in the ten-year survey history. The index stood at 42.4 in August, up from 39.2 in July, the survey conducted by Markit Economics revealed.

Later in the week, the European Central Bank is expected to leave interest rates unchanged at 4.25% as it tries to combat high inflation in the region amid slowing growth.

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