LONDON (Reuters) – Manufacturers in the euro zone ended last year on a sour note, with factory activity declining at a faster rate, according to a survey which offered scant signals of an imminent recovery.
The downturn was again broadbased with the bloc’s three largest economies – Germany, France and Italy – stuck in an industrial recession. Spain stood out as its manufacturing industry expanded robustly.
HCOB’s final euro zone manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, dipped to 45.1 in December, just under a preliminary estimate and further below the 50 mark separating growth from contraction.
In November it was 45.2 and the headline reading has been sub-50 since mid-2022.
An index measuring output, which feeds into a composite PMI due on Monday and seen as a good guide to economic health, sank to 44.3 from 45.1 in November.
“Even in December, the manufacturing sector is not delivering any holiday cheer. It is the same old story – downward. New orders have dropped even more than in the previous two months, crushing any hopes for a quick recovery,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
“This view is backed by the accelerated decline in order backlogs.”
An index measuring new orders fell further below breakeven to a three-month low while the backlogs of work measure sank to 42.0 from 42.9, indicating more overall activity was down to fulfilling old demand.
That was despite factories cutting prices charged for a fourth month and while optimism about this year improved manufacturers reduced headcount again.
Also clouding the outlook President-elect Donald Trump returns to the White House later this month and he has proposed slapping a 10% tariff on all imports which would make European goods more expensive there and so less desirable.
But potentially offering some support the European Central Bank is expected to cut interest rates by at least 100 basis points this year, according to a Reuters poll conducted last month.
(Reporting by Jonathan Cable; Editing by Hugh Lawson)
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