Eurozone Manufacturing Stuck In Contraction Territory

(RTTNews) - The euro area manufacturing sector ended the year firmly in the contraction territory due to the sustained decline in new orders and output, strongly supporting the view that the region has entered a recession at the end of 2023.

The final HCOB manufacturing Purchasing Managers' Index rose to 44.4 in December from 44.2 in November, survey data from S&P Global showed on Tuesday.

The index has remained below the neutral 50.0 mark indicating contraction. Nonetheless, the reading was the highest in seven months.

The reading was initially estimated to have stagnated at 44.2.

"Our Nowcast model aligns with this pessimistic trend, strongly suggesting a contraction in GDP for the fourth quarter," HCOB Chief Economist Cyrus de la Rubia said.

"If this holds true, it paints a bleak picture for the Eurozone and would mean that the Eurozone entered a recession in the third quarter."

Factory production contracted at a faster pace in December as output continued to be constrained by a lack of new business.

The pace of decline in new business was the softest in seven months but it was sharp overall. Export sales continued to fall for nearly two years. Firms made progress on backlogs as demand remained weak. The volume of outstanding work declined further but the rate of depletion was the slowest since May.

In line with the trend, employment continued to decrease.

Companies reduced input buying at a considerable rate and the decline was the weakest in seven months. Stocks of purchases were depleted more rapidly.

Data suggested a further improvement in suppliers' delivery times.

Manufacturers were more confident about their production outlook. Nonetheless, the prevailing level of optimism was subdued by historical comparisons.

On the price front, the survey showed that input prices and output charges dropped at the least marked rates in eight and seven months, respectively.

The marginal increase in the index primarily reflected softer deterioration in Germany and Italy. France registered the strongest worsening of business conditions in over three-and-a-half years.

Germany's manufacturing PMI posted 43.3, up from 42.6 in November and was also above the flash reading of 43.1.

There were accelerated decreases in output and employment, while forward indicators remained on an upward trajectory.

Italy's manufacturing PMI advanced to 45.3, while the score was forecast to remain unchanged at 44.4.

While the sector shrank for the ninth successive month, the deterioration was the least pronounced in the past three months.

Meanwhile, France's manufacturing activity sank deeper into contraction in December with faster declines in production, new orders and purchasing activity.

The final factory PMI fell to 42.1 from 42.9 a month ago. The flash score was 42.0.

Spain manufacturing PMI registered 46.2, slightly down from 46.3 a month ago and forecast of 47.0. Still the contraction in Spain was less pronounced than seen in the other three big economies.