Eurozone Manufacturing PMI Rises Despite Ongoing Sector Struggles

Highlights

• Eurozone PMI at 44.2, indicating persistent manufacturing contraction.
• Softer declines in orders, but intensified job losses.
• Varying recovery trends among Eurozone’s major economies.

Eurozone Manufacturing Sector’s Struggle Continues

November witnessed the Eurozone manufacturing sector grappling with sustained downturns, albeit with some easing in output, new orders, and inventories. The HCOB Eurozone Manufacturing PMI stood at 44.2, a six-month high, indicating a persistent contraction but with a slightly improved outlook compared to October’s 43.1.

Moderate Improvements Amid Ongoing Challenges

Despite the ongoing downturn, there were softer declines in new orders, stocks, and purchasing activity. However, the sector faced intensifying job losses, marking the sharpest employment decline since August 2020. In contrast, input costs fell markedly, allowing manufacturers to lower their selling prices for the seventh consecutive month. This trend reflects a gradual cooling of both input cost and output charge deflation rates.

Geographical Variations and Sectoral Insights

The contraction was widespread, with six of the eight nations covered in the PMI survey showing declines. Austria, Germany, and France experienced the most significant downturns, though all three showed signs of easing. In a positive turn, Greece and Ireland reported growth, with Greece hitting a three-month high. The consumer goods sector appeared more resilient compared to intermediate and investment goods, a typical pattern during recessions.

Future Outlook: Cautious Optimism Amidst Slow Recovery

While business confidence showed improvement, reaching a three-month high, the overall outlook remains cautious. Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, notes that the situation is not yet robust enough to signify a clear upward trend. The slight rise in new orders, reaching a six-month high, offers a glimmer of hope, but it’s too early to declare a definitive positive shift.

Divergent Recovery Paths Across Major Economies

The recovery dynamics vary significantly among the top Eurozone economies. Germany shows signs of softening output declines, while others like Italy and Spain face deepening crises. The recovery, expected to gain traction next year, will likely require more synchronized improvements across national PMI indices. This coordination will be crucial for a robust and self-reinforcing recovery in the Eurozone manufacturing sector.