December 1, 2014 / 9:08 AM / in 3 years

Euro zone factory growth stalls in November as new orders sink: PMI

A worker looks on while pouring melted copper into a furnace at the KGHM Copper and Precious Metals smelter and processing plant in Glogow May 10, 2013. REUTERS/Peter Andrews

LONDON (Reuters) - Euro zone manufacturing growth stalled in November and new orders fell at the fastest pace in 19 months despite heavy price cutting, painting a bleak picture for the coming months, a survey showed on Monday.

Also worryingly for policymakers at the European Central Bank, who are struggling to bolster growth and drive up dangerously low inflation, factory activity declined in the bloc’s three biggest economies of Germany, France and Italy.

“The situation in euro area manufacturing is worse than previously thought... There is a risk that renewed rot is spreading across the region from the core,” said Chris Williamson, chief economist at survey compiler Markit.

Markit’s final November manufacturing Purchasing Managers’ Index was 50.1, its lowest reading since June 2013 and down from an earlier flash reading of 50.4 and from 50.6 in October.

That is barely above the 50 mark that separates growth from contraction, and in a sign that there is little prospect of improvement in December a sub-index covering new orders stayed below the break-even line for a third month, coming in at a 19-month low of 48.7.

An output index, which feeds into a composite PMI due on Wednesday that is seen as good growth indicator, fell to 51.2 from October’s 51.5. That was well below the flash estimate of 51.8 and was its second-lowest reading since June 2013.

The fall comes despite factories cutting their prices for a third month, and at the steepest rate since mid-2013.

Annual inflation cooled to 0.3 percent in November, firmly in the ECB’s deflation “danger zone”, while unemployment held at 11.5 percent for the third month in October.

Still, the ECB is not expected to alter its already very loose policy when it meets on Thursday and there is only an even chance it will buy government bonds, according to a Reuters poll last week.

Editing by Hugh Lawson

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