- Prior 45.0
The headline reading is a 5-month high with the output reading also improving to a 2-month high. A slight improvement in fortunes in Germany helped but the real carry is Spain, with manufacturing activity there seen at a 32-month high. That being said, overall production and new orders continue to post declines albeit less intense than in the past month. But some good news for the ECB is that price pressures are at least continuing to ease but not necessary for consumers though. HCOB notes that:
“There is one bit of good news in these numbers: the recession in the manufacturing sector did not deepen further in
October. Production dropped at a slower pace than in the previous month, and new orders fell less sharply. As a result,
according to our GDP nowcast, which takes into account numerous other indicators in addition to the PMI, industry output
could shrink by 0.1% in the fourth quarter.
“It is not encouraging that inventory drawdowns for purchased materials continue at an unusually high pace. The COVID-19
crisis is still leaving its mark here. The ongoing reduction in inventories is obviously related to the fact that companies
purchased and stockpiled materials and intermediate goods at an unprecedented scale in 2021 and 2022. Sluggish global
demand gives companies no reason to restock, which in turn weighs on the economy.
“The environment in the industry remains deflationary. This is good news for the purchase departments, but it seems
companies are forced to pass on the corresponding price reductions in full to their customers. This points to fierce
competition, which weighs on companies’ profit margins. We assume that competition from China plays an important role
here.
“Delivery times have slowed for the second month in a row, despite the weak demand situation. Instead, it may indicate that
geopolitical tensions are generating delivery problems for logistics companies in October.”