Eurozone Factory Sector Downturn Slows

Euro area manufacturing sector remained in the contraction zone but deterioration in production and orders slowed, survey results from S&P Global showed on Friday.

The final HCOB manufacturing Purchasing Managers’ Index posted 44.2 in November, up from 43.1 in October. This was the highest since May and above the flash estimate of 43.8.

Factory output continued to fall in November but the rate of decline was the softest since May. A slower drop in output coincided with a weaker contraction in new orders.

Manufacturers were less aggressive with their destocking efforts with pre- and post-production inventory levels falling at weaker rates.

Backlogs of work declined in November, extending the current sequence of depletion in outstanding business to a year-and-a-half.

Producers reduced their staffing capacity for a sixth consecutive month. Further, the rate of job shedding was the fastest since August 2020.

There was a pick-up in business confidence in November with growth expectations hitting the strongest in three months. Suppliers’ delivery times shortened for the tenth straight month.

There was a further sharp reduction in costs faced by Eurozone factories. Input prices cooled to its softest since April. And output charges decreased reflecting lower costs.

“The current state of the PMI indexes suggests that this turning point might still be a distance away,” Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

“While the downturn is broadly based across the eurozone, dynamics differ among the top four economies of the currency union,” Rubia added.

Downturn in Germany eased in November with businesses reporting the slowest declines in both output and new orders for six months.

France’s manufacturing sector remained under intense pressure due to rapid deterioration in new orders and output.

Spain’s manufacturing activity also shrank at a slower pace. Similarly, Italy’s manufacturing activity contracted on weaker production and orders.

Germany’s final HCOB manufacturing PMI climbed to 42.6 in November from October’s 40.8. This marked a fourth straight monthly rise in the index. The flash reading was 42.3.

France’s HCOB final factory PMI was little changed from October’s 41-month low. The index rose marginally to 42.9 from 42.8 in October. The initial estimate was 42.6.

Spain’s manufacturing PMI rose more-than-expected to 46.3 in November from 45.1 in October. The score was forecast to climb to 45.5.

Italy’s factory PMI slid to 44.4 from 44.9 in October. This was the sharpest contraction since June and well below economists’ forecast of 45.3.

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