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Factories add to euro zone gloom

Monday, December 01, 2014 - 01:30

Factories across the euro zone stepped down a gear last month as heavy price cutting - made possible by tumbling input costs - failed to revive global demand. As Sonia Legg reports it increases pressure on the ECB to consider quantitative easing sooner than planned.

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Low oil prices are good for most manufacturers. But in the euro zone in November they couldn't oil the wheels enough to lift industry. Manufacturing stalled in November and new orders fell at the fastest pace in 19 months. That's despite heavy price cutting. With China slowing too it's all very bleak, says ETX Capital's Joe Rundle. (SOUNDBITE) (English) ETX CAPITAL, HEAD OF TRADING, JOE RUNDLE, SAYING: "The euro zone really is woeful at the moment and, although Germany is slowing down, the real biggest concern is France which is slipping into - appears to be slipping into a recession quite quickly so... and this is on top of policymakers out of the ECB on Saturday saying they probably aren't going to do any monetary easing so that's quite a difficult situation. I can't see the euro zone resolving itself until well into 2016." Last week the ECB said it might consider sovereign bond buying - or QE - as early as next year. But the falling oil prices are having an unwelcome impact in Europe. Robert Halver is from Baader Bank. (SOUNDBITE) (German) CAPITAL MARKET ANALYST FROM BAADER BANK, ROBERT HALVER, SAYING: "We see that there is a significant risk of deflation in the whole euro zone. This means that Mario Draghi, the ECB president, will have to step on the gas again to prevent that." It seems Germany is no longer the euro zone's knight in shining armour - it's manufacturing activity shrank at its fastest pace in 17 months. It even fell below the key 50 mark which indicates growth. Economic uncertainty and weak demand from abroad were part of the problem. But the euro zone economy could be on the verge of a vicious circle - and it's one the ECB may have to try and break.

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Factories add to euro zone gloom

Monday, December 01, 2014 - 01:30