Pantheon Macro: The Manufacturing Sector in the Euro Zone Continues to Slump, but it cannot Prevent the ECB from Continuing to Raise Interest Rates

Melanie Debono, senior European economist at Pantheon Macroeconomics, said that the final value of the euro zone manufacturing PMI fell to 43.4, indicating that the downturn in the euro zone’s manufacturing industry is intensifying.
Debono noted that the downward revision in the German index offset the upward revision in the French index, leaving the overall index lower than previously estimated. Weak demand was to blame, with new orders falling at the fastest rate since last October.
An index of manufacturing input prices fell to its lowest level since July 2009, prompting companies to lower selling prices, Debono said, suggesting that the moderation in inflation will continue.
But she added that with service sector inflation still high and core inflation still rising, the ECB was still expected to raise rates further.