Perspectives
- A further month of worsening manufacturing sector conditions was indicated by the Eurozone PMI survey in December, extending the trend to two and a half years.
- During the month, purchasing activity and input stocks were drastically reduced, while production and new orders also saw faster contractions.
- Business optimism somewhat improved, but factory employment levels also declined.
Another month of worsening circumstances in the manufacturing sector was indicated by the Hamburg Commercial Bank’s (HCOB) purchasing managers’ index (PMI) survey for the eurozone in December, extending the current downward trend to two and a half years.
The PMI fell slightly from 45.2 in November to a three-month low at 45.1, marking its thirtieth consecutive sub-50 rating of the month.
Last year ended with large declines in input stockpiles and purchase activity, as well as increased contractions in production and new orders.
According to a report by S&P Global Ratings, factory employment levels also kept declining, although company confidence somewhat improved as growth estimates reached a four-month high.
In the eurozone, factory expenses were unchanged. In December, the cost of produced products decreased for the fourth consecutive month.
The data from December revealed a significant difference. The south of the zone continues to fare better, with Greece and Spain seeing more robust improvements in the state of their industrial sectors.
However, the main three countries of France, Italy, and Germany all reported declines, more than offsetting the expansions there. The manufacturing PMI in France fell to its lowest level since May 2020, making it the most significant.
At the end of 2024, demand for goods from the eurozone declined once more. The contraction rate accelerated and was essentially consistent with the average for the recent 32-month trend of declining sales.
The slower decline in new business in December was likely domestic in origin, as seen by a milder decline in new export orders. In December 2024, sales to foreign clients declined at the slowest rate in four months.
The industrial sector in the eurozone had a continuous decline in production quantities. The output decline in December was really the worst since October 2023.
Businesses managed to maintain output levels to a certain extent. Companies’ backlogs, which decreased more and more quickly than they had the month before, provided support.
Factory employment in the Eurozone continued to decline, bringing the current job loss period to little over a year and a half. Although it decreased somewhat, the workforce’s decline was still noticeable.
Last December, there was yet another sharp monthly decline in purchasing activity. Another steep decline in pre-production inventories by eurozone businesses coincided with lower input purchases.
The market decline in December was one of the worst since 2009. The amount of completed items stored in warehouses decreased as well. Manufacturers in the eurozone paid the same prices throughout the month.
In December, companies surveyed expressed greater confidence about the future, with growth projections for the upcoming year at their highest level in four months. Nonetheless, corporate confidence stayed muted in comparison to the series average.