LONDON – European manufacturers are struggling to win business, and slack global demand forced many companies to shed staff in August, underlining concerns that economic recovery will be weak and gradual. Surveys of manufacturing companies across the region showed an across-the-board slowdown as companies reacted to the uncertain outlook for global economic growth. The Reuters Eurozone Purchasing Managers’ index dropped to 50.8 in August, just above the critical 50 line that divides growth from shrinkage, but below the 51.6 recorded in July. «The outlook for recovery is fading,» said Adolf Rosenstock at Nomura International in Frankfurt. «We are looking at another possible recession in manufacturing which would not bode well for the overall economy.» Demand slowed in most economies and the employment index showed deepening job cuts, slipping to 47.5 from 49.2. In Germany, the region’s biggest economy, manufacturing activity contracted after only two months of slim growth and the PMI index fell to 49.1 from 50.1 in July and 50.2 in June. The equivalent US index, from the Institute of Supply Management, is due today and will be watched nervously by markets after it tumbled to 50.5 in July from 56.2 in June. However, the consensus forecast is for the US index to recover a little to 51.6, averting a renewed contraction in US manufacturing. German floods «Clearly, if we see the situation in the US deteriorating, that might bode poorly for the recovery in Europe,» said Lorenzo Codogno at Bank of America in London. «But I don’t think there’ll be a sharp decline there.» Reuters is due to launch a survey of 350 Japanese manufacturing companies early today. As with the other manufacturing surveys compiled for Reuters by NTC Research, the questions are about real events and not opinion. NTC said German manufacturers were held back in August by subdued investment and customers’ reluctance to build up stocks. «New sales were often reported to have been won at the expense of margins, as price discounting was more widely reported… recent adverse weather conditions were also reported to have hit sales to certain export clients,» NTC said. Floods in central Europe have caused deaths, forced the widespread evacuation of homes and left great damage in historic cities such as Dresden. Manufacturers paid more for raw materials in most countries, but the pace of price rises slowed, reinforcing expectations that the European Central Bank will keep its benchmark rate at 3.25 percent for some time. «There will be more calls for rate cuts,» said Rosenstock. «Eventually central banks will give in but the problem is how to present it. They don’t want to look panicky.» Job worries However, in Europe’s second-largest economy, Britain, manufacturing returned to modest growth at 51.0 in August from 49.1, soothing concerns that the July downturn signalled a renewed recession in the sector. «This is a bit stronger than expected and takes away a bit of ammunition from the doom and gloom merchants,» said Adam Chester at Halifax Bank in London. Also showing expansion, albeit at a slower pace, was France, where the PMI stood at 52.2 in August from 53.5 in July. But French companies remained cautious about hiring new people, despite firm order books and rising output. «Worries over strict employment legislation (in France), as well as uncertainty over how long the current period of growth in manufacturing activity will last, continued to make employers cautious,» said NTC. In Italy, the PMI edged lower to 51.6 from 51.8, mostly on weaker orders and job cuts. «(Italian) panel firms generally linked clients’ reluctance to place… new orders to uncertainty regarding the strength and sustainability of the global economic recovery,» said NTC. Increased demand in Greece In Greece the index was at 51.8 in August, its lowest level since January, from 52.9 in July. The Hellenic Purchasing Institute and NTC Research said its survey of 300 purchasing managers showed that Greek manufacturing continued to grow but at a slower rate than the previous month. «Steady growth in August signalled the expansion of Greek manufacturing for the ninth consecutive month,» said NTC Research. August’s growth was due to an increase in the level of production, new orders as well as a marginal increase in employment, NTC said. Export demand expanded for the 36th month, although the rate of growth flagged for the third consecutive month, NTC Research said. Slower growth in production and new orders was reflected in the slowdown in the overall rate of manufacturing expansion over the month, it said. Manufacturing employment continued to grow as companies met increased demand but did not show the previous strong upward trend in July and August, NTC Research said. «After a period of strong, steady growth the expansion of employment in Greek manufacturing almost halted in July and August,» it said. But the rate of employment expansion grew in August in comparison with the previous month as companies met increased demand, it added. Other countries in Europe The Spanish index fell for the third month running to 51.5 in August from 51.6, while in the Netherlands it inched down to 51.4 from 51.5. Manufacturers in Ireland enjoyed a seventh month of expansion, but the pace slowed sharply to 51.3 in August from 53.6 in July. In Sweden, whose central bank is among the few that have already raised interest rates this year, the index fell to 53.6 from 54.3 in July. In Russia, too, the manufacturing sector cooled in August, but economists said robust domestic demand showed the economy would show strong growth this year. The Russian PMI stood at 52.6 in August from 53.5. But in Austria, where the index dropped 1.4 points to 50.4 in August, Bank Austria Creditanstalt said, «The Austrian industry is on the verge of a renewed stagnation.» And Switzerland’s manufacturing survey showed contraction gripping the sector, with the index falling to 45.4 from 48.2.