Eurozone Manufacturing Sector Ends Year in Steep Downturn

Data collected 5–14 December.
• Final Eurozone Manufacturing PMI at 46.1 in
December (flash estimate 46.3)
• Downturn remains widespread, with all nations
bar Ireland reporting contractions
• Cost caution leads to job losses and further
scaling back of inventory holdings

Some of the details looked worse, particularly those that cover purchasing manager’s activity for December among the region’s countries:

Ireland 51.4 4-month low
Netherlands 49.6 3-month high
Austria 48.1 2-month low
Italy 46.7 9-month high
Germany 46.0 2-month low
France 44.6 4-month high
Spain 44.6 2-month low
Greece 41.4 2-month low

The Greece and Spain number should be expected. Much more troubling is the slowdown in Europe’s two largest economies by gross domestic product — France and Germany.

Chris Williamson, Chief Economist at Markit said:

The eurozone manufacturing sector remained
entrenched in a steep downturn at the end of the
year. Although not as severe as in the autumn, the
survey indicates that production continued to fall at
a quarterly rate of approximately 1% in December,
therefore acting as a severe drag on the wider
economy. The region’s recession therefore looks
likely to have deepened, possibly quite significantly,
in the final quarter.

Manufacturers look to be in for another tough year
in 2013, though prospects have brightened a little,
as producers should benefit from signs of stronger
demand in key export markets such as the US and
China. Improving competitiveness remains the key
to success, however, and Ireland perhaps provides
a reassuring example to other countries of how
exports can rise on the back of structural reforms.

Much of course also depends on how the region’s
debt crisis evolves over coming months, and any
set-backs could mean the resulting damage to
domestic business and consumer confidence could
easily offset any gains made in export markets
outside of the eurozone.

Douglas A. McIntyre