The manufacturing industry is one of the major backbones of all countries. It is through manufacturing that raw materials produced by the countries are converted to finished products. This makes products readily available to consumers and create jobs to the residents. As such, the role of the manufacturing industry cannot be understated.

Policymakers, traders, and investors regularly watch for the trends in the manufacturing industry. There are many data points that are released every month but the most important one is the Purchasing Managers Index (PMI), which is released by data analytic firm IHSMarkit. The data usually shows the activity level of purchasing managers in the manufacturing sector. Data above 50 and growing is usually regarded as being positive while the data below 50 is viewed as being negative.

Today, we received the data from Markit for Germany and the European Union, which disappointed. The data showed that the Flash Germany Composite Output Index fell to a 20-month low in May. This was lower than the 54.6 data released in April. It was also the fourth straight month of declines. In January, the data was at an almost 7-year high.

Germany’s PMI was at 56.8 in May, which was lower than the 58.1 released in April. This was the lowest reading since February last year. This was a reflection of reduced growth in factory new orders and an easing of supplier delays from the previous record levels. The confidence among businesses declined to the lowest level in 18 months.

Another negative from the report was the slow growth of the total new business in the private sector. It rose at the lowest rate in three years. On a positive side, there was a solid increase in the level of employment in the Germany’s private sector. However, the rate of job creation fell to a 17-month low.

At the same time, the company released the PMI numbers for France, the second largest economy in Europe. The data showed that there was a renewed slowdown in the French private sector output growth. The data was at 54.5 which was lower than the 56.9 released in April. This was the weakest expansion since early 2017.

Meanwhile, the data showed a slowdown in the EU manufacturing industry. Data from Markit showed that the PMI fell to 54.1 in May from the 55.1 reported in April. The increase was the weakest in more than one and half years. The growth in manufacturing and services declined to the 18 and 16-month lows respectively.

The current challenges in Europe are likely a reflection of the uncertainty in the market right now especially on the issue of trade. The US, which is one of the largest trading partner of the EU has started placing tariffs on EU’s imports. In addition, there is an uncertainty over the US decision to exit the Iran deal and its impact to EU businesses.

The euro continued to fall against the dollar after the data was released. The EUR/USD pair is now trading at 1.1726 which is the lowest level since December.

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