- Prior 44.2
The reading is a 7-month high, helped by a modest improvement in German manufacturing conditions. That being said, this still marks a significant contraction in the euro area industry with the outlook for this year also still up in the air. The worry here is that the downturn might eventually lead to a dent in the labour market, so we'll have to see if lower prices will be able to help much in the early stages of the year. HCOB notes that:
“Amid a relentless slump in the manufacturing sector of the Eurozone, the HCOB PMI has shown little improvement compared to November. This indicates a sustained decline in both activity and demand for manufactured goods. The sluggishness of new orders echoes the gloom, retreating almost as swiftly as the previous month. Our Nowcast model aligns with this pessimistic trend, strongly suggesting a contraction in GDP for the fourth quarter. 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.
“The destocking process is showing no signs of letting up. Stocks of purchases are shrinking at an accelerated pace and for the eleventh straight month, surpassing the rate observed in the previous month. The pivotal turning point in the inventory cycle is a key factor for initiating a recovery. Our projection places this anticipated shift in the first half of 2024, although the present indicators do not yet support this expectation.
“Given that the Christmas season is in full swing in Europe, many readers may strive for some positive notes. Indeed, a growing number of firms are expressing optimism about their future output over the next 12 months. This optimism could be rooted in the anticipation of a potential decline in interest rates, which is a significant issue for the manufacturing sector, known for its capital and debt-intensive nature. Additionally, companies may also look for lower energy prices as another potential factor contributing to their hopeful outlook.
“As for the top four eurozone economies, December’s ranking by manufacturing sector performance made for ugly reading. The least ugly was Spain – Here the PMI is signalling a fall of economic activity that is less pronounced than in Italy, whose industry, in turn, is shrinking at a slower pace than Germany’s. France is carrying the red lantern.”
