Manufacturing Sector in the Eurozone Faces Deepening Contraction
According to private surveys, the manufacturing activity in the Eurozone experienced a further decline in December. The industrial output in the single currency bloc plunged into a deeper contraction last month, as production dropped for the first time in ten months due to another decline in new orders.
PMI Index Drops to Nine-Month Low
The purchasing managers’ index (PMI) for the manufacturing sector in the Eurozone, compiled by S&P Global, fell to 48.8 points in December from 49.6 points in November. This is the lowest reading in nine months and falls below the 50-point threshold that distinguishes growth from contraction for the second consecutive month.
Decline in Industrial Activity Across 20 Eurozone Countries
Private surveys highlighted a generalized decrease in activity across the 20 Eurozone countries. Germany, the largest economy in the bloc, performed worst among the eight analyzed countries, with its PMI index reaching a ten-month low.
Italy and Spain also returned to contraction territory. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, stated, “Demand for Eurozone manufactured goods is slowing down again. Companies seem neither able nor willing to generate momentum for the upcoming year, instead acting cautiously, which is detrimental to the economy.”
France as a Positive Exception and UK’s Industrial Growth
France was one of the few positive exceptions, with its manufacturing PMI reaching a 42-month high. Meanwhile, in the UK, which is outside the European Union, industrial activity grew at its fastest pace in 15 months in December, driven by the recovery in demand following relief from Chancellor of the Exchequer Rachel Reeves’ budget.
Key Questions and Answers
- What is the main issue affecting European industrial activity? The primary concern is a slowdown in demand for manufactured goods within the Eurozone, causing companies to act cautiously rather than generating growth.
- Which countries are experiencing the most significant contraction in industrial activity? Germany, Italy, and Spain are among the countries facing notable contractions in their manufacturing sectors.
- Are there any countries showing positive signs in industrial activity? France stands out as a positive exception, with its manufacturing PMI reaching a 42-month high.
- How is the UK’s industrial activity faring despite being outside the European Union? The UK’s industrial activity grew at its fastest pace in 15 months, driven by the recovery in demand following Chancellor Rachel Reeves’ budget.
