- Prior 46.0
The biggest drags to Eurozone manufacturing activity on the month are Germany, France, and Italy. Sustained weakness in demand conditions is arguably the biggest factor but Germany also saw its steepest decline in employment conditions since August 2020. That's not a good indication as the downturn looks to persist into next year. HCOB notes that:
“These numbers look terrible. It's like the eurozone’s manufacturing recession is never going to end. As new orders fell fast and at an accelerated pace, there’s no sign of a recovery anytime soon. According to our nowcast, the manufacturing sector’s output is going to decrease by 0.7% in the fourth quarter compared to the previous quarter. This slump is likely going to drag into next year.
“The downturn is widespread, hitting all of the top three eurozone countries. Germany and France are faring the worst, and Italy is not doing much better. By main industrial grouping, it’s the capital goods sector which is taking the biggest hit. In an interesting development, Spain’s companies in the capital goods sector were able to show accelerated growth. This might be linked to the heavy floods in Spain, where an estimated 100,000 cars were destroyed and need to be replaced. But this boom most probably won’t last.
“Companies continue to trim their staff. While the official unemployment rate has trended down for a few years and stabilized at 6.3%, the PMI and the cost-cutting plans of many companies suggest we are headed for higher unemployment rates.
“The inventory cycle is not looking good. Stocks of both materials and finished goods continue to decline, extending the near two-year destocking process. When the cycle finally turns, we can expect demand to spike, but that doesn't seem to be happening anytime soon.”
