EMU PMI data

(Bloomberg)--Growth in Europe’s manufacturing industry slowed in September as a cooling global recovery restrained demand. A gauge of manufacturing in the 16-nation euro region declined to 53.7 from 55.1 the previous month, London-based Markit Economics said today. That compares with an initial estimate of 53.6 released on Sept. 23. It’s the 12th straight month with a reading above 50, indicating expansion. Europe’s economy is cooling after growth accelerated to the fastest pace in four years in the second quarter. The European Commission sees a more “moderate” expansion in the second half as unemployment close to a 12-year high hobbles consumer spending and governments step up austerity measures to reduce budget deficits.

“We see a global economic dent over the winter months,” said Christoph Weil, a senior economist at Commerzbank AG in Frankfurt. “Manufacturing output will continue to expand if at a slightly weaker pace.” European services growth also slowed in September, Markit said on Sept. 23. It will publish the final figure, along with a composite gauge for both industries, on Oct. 5. European Central Bank President Jean-Claude Trichet said on Sept. 27 that there is “continuing uncertainty” about the economic outlook. ECB officials will hold their next policy meeting on Oct. 9 after last month extending emergency measures for banks into 2011.

China, U.S.

In Germany, the manufacturing gauge dropped to 55.1 in September from 58.2 in August, the lowest since January. In Italy, the measure slipped to 52.6 from 52.8, while manufacturing in Ireland contracted. France’s index rose to 56 from 55.1. Other economies are also showing signs of cooling, prompting central banks from the Federal Reserve to the Bank of Japan to consider additional steps to support their recoveries. In the U.S., a factory gauge probably dropped to 54.5 in September from 56.3, according to the median of 83 estimates in a Bloomberg News survey. The Institute for Supply Management will publish the report at 10 a.m. in New York. Other reports may show consumer confidence and construction declined.

Still, Chinese manufacturing expanded at the fastest pace in four months, with a government index published today rising to 53.8 from 51.7 in August. While European companies including carmakers Renault SA and Volkswagen AG are benefiting from rising demand in Asian nations including China, that’s being partly offset by weakness in Europe.

The automotive market in Europe may shrink 2 percent in 2011 after a contraction this year, Renault Chief Executive Officer Carlos Ghosn said at the Paris Motor Show yesterday. Industry sales in the region remain “very weak,” said Nick Reilly, CEO of General Motors Co.’s Opel division.

Outlook

The outlook for Europe’s economy is being clouded as investors question the ability of nations such as Ireland and Portugal to handle their fiscal burdens without external aid. The yield spread between the two nations’ 10-year debt and German bunds widened to a record this week before narrowing. Portugal unveiled tougher measures to reduce its budget gap, while Ireland said it remains committed to meeting a 2014 deficit target even as the cost of bank bailouts mounts.

Reviving exports helped the euro-area economy expand 1 percent in the second quarter, the fastest pace in four years. The Brussels-based commission said last month that growth may weaken to 0.5 percent in the current quarter and 0.3 percent in the year’s final three months. Still, some data point to a limited slowdown. European confidence in the economic outlook unexpectedly improved this month to the highest since January 2008.

“Economic developments have been more positive than expected,” Jean-Claude Juncker, who heads the euro-area group of finance ministers, said in Brussels yesterday. “We’re fully aware of the remaining headwinds for the euro-area economy. That requires that we go ahead with necessary fiscal consolidation.”

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net