The euro zone's manufacturing sector grew at a slightly faster pace in September than previously thought but some countries shifted into reverse gear, further entrenching a two-speed recovery, a key survey showed today.
Markit's Eurozone Manufacturing Purchasing Managers' Index for September dropped to 53.7 from 55.1 in August, slightly above an earlier flash reading of 53.6.
While that was the lowest since January, it marked a year of readings above the 50.0 mark that divides growth from contraction.
The output index sank to its lowest reading in nearly a year, to 54.0 last month from 57.1 in August, and also revised down from a flash reading of 54.4, suggesting manufacturing growth in the euro area is gearing down.
"The speed of the decline and the fact that Ireland, Spain and Greece are all now moving in reverse gear, is worrying," said Chris Williamson, chief economist at Markit, which sponsors the surveys.
Data from Spain showed its manufacturing sector contracted as the index dropped below the 50 mark for the first time since February while in Germany, Europe's biggest economy, the manufacturing PMI sank to 55.1 from 58.2 in August.
Italy also saw a cooling in factory activity too, but France, the bloc's second biggest economy, saw its manufacturing sector expand at its fastest pace in five months.
"The (PMI) data are still some way from pointing to a double-dip recession for the single-currency area as a whole, but renewed downturns in peripheral countries are likely to act as a drag on overall euro zone growth and keep unemployment high for some time to come," Mr Williamson said.
Data due later today are expected to show unemployment in the bloc held steady for the sixth consecutive month at 10 per cent. The PMI employment index nudged up last month as employers hired more workers.
The output price index jumped to 53.3 last month from August's 52.2, suggesting manufacturers were able to pass on some of the increased input costs to customers and improve their margins.
Preliminary data released yesterday showed inflation, which the European Central Bank (ECB) targets at close to, but below 2.0 per cent, was at 1.8 per cent in September, faster than 1.6 per cent in August.