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Euro zone factory output stayed strong in August: PMI

FILE PHOTO: A steel worker of ThyssenKrupp stands amid sparks of raw iron coming from a blast furnace at a ThyssenKrupp steel factory in Duisburg, western Germany, January 30, 2020. REUTERS/Wolfgang Rattay

LONDON (Reuters) - Euro zone manufacturing activity remained on a recovery path last month, a survey showed on Tuesday, but factory managers were wary about investing and hiring workers as the coronavirus pandemic rages on.

Manufacturing output, which didn’t suffer quite as sharp a decline as the service industry during the height of the pandemic, increased for a second straight month.

IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) dipped to 51.7 from July’s 51.8, in line with an earlier flash reading and comfortably ahead of the 50 mark separating growth from contraction.

An index measuring change in output, which feeds into a composite PMI due on Thursday that is seen as a good gauge of economic health, rose to 55.6 from 55.3, just below the flash reading of 55.7 but its highest level since April 2018.

“Euro zone factory output rose strongly again in August, providing further encouraging evidence that production will rebound sharply in the third quarter after the collapse seen at the height of the COVID-19 pandemic in the second quarter,” said Chris Williamson, chief business economist at IHS Markit.

Despite optimism at a two-year high, factories reduced headcount and ordered fewer raw materials. The employment index sagged well below the break-even mark at 44.2, albeit closer to it than July’s 42.9.

“A key theme of the latest survey is one of firms taking a cautious approach to costs and spending, notably in respect to investment and hiring, amid continued worries about the strength of future demand and uncertainty over the course of the pandemic,” Williamson said.

A full recovery from the euro zone’s deepest recession on record will take two years or more, according to a Reuters poll of economists last month.

Reporting by Jonathan Cable, editing by Larry King

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