Manufacturing activity in the 13-nation eurozone slowed in October to a two-year low amid a surging euro and record oil prices, according to a survey released Oct. 24.
The eurozone's seasonally adjusted purchasing managers' index (PMI), compiled by NTC Research, fell in October to 51.5 in October from 53.2 in September, the lowest level since August 2005. Markets had been looking for a limited decline to around 52.9. Although the index showed manufacturing activity growing at the slowest pace for over two years, it still remained in expansion as indicated by a reading over 50 points.
The results indicate that "the sector is increasingly struggling as it is buffeted by the very strong euro, elevated oil prices, higher interest rates and slowing foreign demand," said Global Insight's Chief European analyst Howard Archer.
The PMI index fall reinforces the case for the European Central Bank to hold off from raising interest rates again, Archer added. The euro has steadily risen from record to record against the U.S. currency, hitting a new all-time high of $1.4347 on Oct. 22, making eurozone exports less competitive on international markets.
World oil prices remain high, though they have in recent days slipped from the record $90.07 for light sweet crude recorded last Oct. 19. However on Oct. 23 the price was still above $85, quite high enough to help tighten conditions for businesses.
Copyright Agence France-Presse, 2007