Eurozone manufacturing has continued to weaken, with a series of flash PMI readings revealing factory output slumped to a two year low in August.

PMI readings dipped in all European nations. As a whole the eurozone's PMI fell down by 0.7 points, more than in an earlier estimate, prompting fears of a looming industrial recession.

The final eurozone manufacturing reading for the month fell from 50.4 in July to 49.0 in August 2011, its lowest level since August 2009. Notable declines were France's PMI falling to 29.1, a 25 month low, Germany's reading dropping by 1.1 to 50.9, a 23 month low and Italy's PMI dipping down to 47.0, a 24 month low. French and Italian production contracted for the first time since June and September 2009 respectively, while German growth continued to weaken.

Mr Chris Williamson chief economist at Markit said that the data for August was even worse than the earlier disappointing flash numbers, signaling an end to the manufacturing recovery which began in October 2009 and a growing risk of recession.

He added that "PMIs either signaled stagnation or contraction in all countries surveyed, with output falling for the first time since July 2009 and job creation sliding to the lowest for nearly a year."

The biggest decreases were for output and new orders, which fell by 1.3 points and 1.6 points, respectively. New orders continue to stand well below output at 46.0 versus 48.9. New export orders feel for the second month running, dropping to the greatest extent since June 2009. Germany's decline in new export orders was the steepest drop in the eurozone.

Mr Williamson said that on the back of weak GDP numbers for Europe and gross spending still on the slide, there is a serious risk that the region will fall back into recession. He added that "With GSP having risen just 0.2% in the second quarter, there is a growing risk that the eurozone could slide back into recession in the second half of the year."

(Sourced from www.citywire.co.uk)