Eurozone Factory Slowdown Softens As Supply Chain, Inflation Pressures Ease

(RTTNews) - Downturn in the euro area manufacturing slowed in the final month of 2022 amid healing supply chains and softening inflationary pressures, final results of the purchasing managers' survey from S&P Global showed Monday.

The manufacturing Purchasing Managers' Index rose to a three-month high of 47.8 in December from 47.1 in November. The reading came in line with the flash estimate.

Among sectors, consumer and intermediate goods manufacturing logged deterioration, while capital goods production showed a marginal growth.

The PMI survey showed that output contracted for the seventh straight month in December, but the latest pace of fall was the weakest since June.

New order inflows dropped in line with the trend in output. A slower fall in new export businesses helped to alleviate the decline in overall new orders. There was a sharp fall in backlogs of work in December. Manufacturers consequently cut back hiring, with the job creation rising at the slowest pace in nearly two years.

The survey showed softening of inflationary pressures in December. Input cost inflation was the weakest since November 2020. Selling prices grew at the weakest rate since March 2021 as firms tried to pass through the lower expenses to their clients.

Finally, the business sentiment improved for the second straight month, rising further from October's two-and-a-half-year low.

Potential fiscal and monetary policy changes, the impact on supply chains and commodity prices from the changing response to COVID-19 in China and the possibility of sharply changing energy prices amid the changing geopolitical situation are the key threat to the stability, Chris Williamson, chief business economist at S&P Global Market Intelligence, said.

Driven by a further reduction in supply chain frictions, Germany's factory PMI rose to a three-month high. The S&P Global/BME PMI advanced to 47.1 from 46.2 in the prior month. The flash estimate was 47.4.

France's manufacturing sector shrank further with output and new orders falling for a seventh successive month. Nonetheless, the pace of contraction softened. The factory PMI advanced to 49.2 in December from 48.3 a month ago.

Italy's manufacturing sector remained mired in a downturn during December. The PMI posted 48.5 in December, up slightly from 48.4 in November and matched expectations.

Spain's manufacturing PMI advanced to 46.4 in December from 45.7 in the previous month. The score was also above economists' forecast of 46.2.