Euro zone manufacturing output has hit a 12-month low, the latest edition of the HCOB Flash Eurozone PMI index, compiled by S&P Global, has found.
According to the provisional PMI survey data for December, the fall in manufacturing output marks 21 consecutive months of decline, and is the most significant for a year.
The HCOB Flash Eurozone Manufacturing PMI Output Index stood at 44.5, down from 45.1 in November.
Business activity
Overall, the euro zone private sector ended the year in contraction, as business activity decreased for the second month running, the index showed.
‘Output was scaled back amid sustained reductions in new orders,’ it noted. ‘Meanwhile, the pace of job cuts was the fastest in four years as companies responded to a drop in workloads by lowering their staffing levels. Rates of inflation of both input costs and output prices quickened at the end of the year, with charges rising at a pace that remained above the series average.’
There was a modest return to growth in the services sector, however, with the HCOB Flash Eurozone Services PMI Business Activity Index standing at 51.4, up from 49.5 the previous month.
Germany and France
As S&P Global noted, the overall reduction in business activity in the euro area was reflective of poor performance in Europe‘s two largest economies, Germany and France, both of which contracted in December.
After falling to a one-year low in November, business confidence recovered slightly in December, although it remains below average, the data showed.
“The end of the year is somewhat more conciliatory than was generally expected,” commented Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “Service sector activity returned to growth territory and is showing a noticeable, if not exuberant, pace of expansion, similar to that seen in September and October.
“While manufacturing is still deep in recession, the rebound in services output is a welcome boost for the overall economy.”
On Germany and France, de la Rubia added that both countries are “currently in politically uncertain waters. This is preventing the necessary reforms from being implemented in the short term to boost growth again and is contributing to the ongoing weakness in both countries. However, this situation also entails upside risks.
“If future governments manage to chart a clear course, there could still be positive surprises next year. Eurozone companies were actually slightly more confident than in November that business activity will be higher a year from now than it is today.” Read more here.
