Eurozone Manufacturing Sector Logs Another Contraction

Eurozone manufacturing activity continued its downward trend in November but the rates of decline in output and new orders were less aggressive than seen a month ago, final data from S&P Global showed on Thursday.

The final manufacturing Purchasing Managers’ Index rose to a two-month high of 47.1 in November from 46.4 in the previous month. The flash reading was 47.3.

Nonetheless, the sub-50.0 reading for the fifth month signals deterioration in the health of the goods-producing sector.

Manufacturing output dropped for a sixth straight month reflecting the deterioration in order books. New orders declined as clients were hesitant to place orders due to economic uncertainty and high selling prices.

Eurozone manufacturers reported that their stocks of unsold goods rise, and at a slightly faster rate. In order to accommodate reduced production requirements, manufacturers cut their purchasing activity. Despite the fall in purchasing, input stocks continued to accumulate.

Easing supply-chain frictions helped to alleviate cost pressures for manufacturers in November. Input price inflation rose at its weakest pace in almost two years. Nonetheless, inflation remained elevated on high energy costs.

Softer input cost inflation fed through to output charges, with manufacturers taking a less aggressive approach to their price setting. The overall output price inflation was the weakest since March 2021.

Subdued demand conditions, high inflation, the European energy crisis and recession fears weighed on business sentiment.

Chris Williamson, chief business economist at S&P Global Market Intelligence said, the PMI signals some welcome moderation in the intensity of the manufacturing downturn in November, which will support hopes that the region may not be facing a winter downturn as severe as previously anticipated by many.

All of the monitored Eurozone nations recorded manufacturing PMI readings below the crucial 50.0 mark.

With a notable decline in demand, Germany’s manufacturing activity remained in contraction zone. The S&P Global/BME factory PMI rose to 46.2 from 45.1 in the previous month. The flash score was 46.7.

France’s manufacturing PMI posted 48.3 in November, up from 47.2 in October. This was the highest reading in three months but below the flash score of 49.1.

Spain’s manufacturing activity shrank for the fifth consecutive month in November. The factory PMI came in at 45.7 versus 44.7 a month ago. Economists had forecast the index to climb to 45.6.

Italy’s manufacturing PMI registered 48.4 in November, up from 46.5 in October. The latest reading pointed to a slower pace of decline that was only mild overall.

Elsewhere, data from Eurostat showed that the unemployment rate reached a new record low in October. The rate came in at 6.5 percent, while it was expected to remain unchanged at 6.6 percent.

The number of people out of work decreased 1.053 million from the last year to 10.872 million.

The youth unemployment rate dropped to 15.0 percent from 15.2 percent in the previous month but it continued to remain high.

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