Euro zone manufacturing slips deeper into contraction at year-end, PMI shows

Reuters :

Euro zone factory activity retreated further into contraction territory in December as production decreased for the first time in 10 months, dampened by accelerating declines in new orders, a survey showed on Tuesday.

The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 48.8 in December from 49.6 in November, marking its lowest reading in nine months and lower than a preliminary estimate of 49.2.

Readings above 50.0 indicate growth in activity, while those below that point to contraction.

“Demand for manufactured products from the euro zone is slowing down again. Significantly fewer orders, declining order backlogs, and continued inventory reduction are the most obvious indicators of this,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

“Companies seem neither able nor willing to build momentum for the coming year, but are instead exercising caution, which is poison for the economy.”

The output subindex dropped to 48.9 from November’s 50.4, marking its first contraction since February.

New orders fell at the quickest pace in almost a year, with export demand decreasing at the fastest rate in 11 months.

Germany, the bloc’s largest economy, recorded the weakest performance among the eight nations monitored with the PMI reading hitting a 10-month low. Italy and Spain also slipped back into contraction territory.

France provided a rare bright spot, with its manufacturing PMI jumping to a 42-month high.