Euro area Dec biz activity falls steeper; manufacturing leads downturn

Downturns were again recorded across the manufacturing sector, which reported a further steep fall in inflows of new business, leading to a further depletion of backlogs of work.

Jobs were cut for a second month running as firms scaled back operating capacity in line with the worsening order book situation and persistent gloomy prospects for the year ahead, with future sentiment remaining well below its long-run average despite lifting slightly higher.

Factories also cut inventories of inputs at a rate not seen since 2009.

Inflation signals in the euro area were mixed: input cost inflation cooled but selling price inflation accelerated, the latter notably remaining elevated by historical standards, S&P Global said in a release.

The seasonally adjusted HCOB Flash eurozone composite PMI output index registered 47 in December, down from 47.6 in November to signal a seventh consecutive monthly reduction in business activity across the euro area.

The weak reading rounds off the sharpest average quarterly decline in activity recorded by the survey since the fourth quarter of 2012, if early pandemic lockdown months are excluded.

Manufacturing continued to lead the downturn, with output falling for a ninth month running, the rate of decline re-accelerating after the moderation seen in November, albeit remaining less severe than seen in the four months to October.

The overall reduction in business activity was again a reflection of deteriorating order books. Inflows of new orders fell for a seventh straight month, the rate of decline remaining unchanged on the steep pace seen in November.

New orders for goods fell for a twentieth straight month, the rate of decline still sharp by historical standards despite easing for a second month in a row. Manufacturing backlogs continued to fall sharply

Looking ahead, firms grew more optimistic regarding the year-ahead outlook for output in December, with sentiment at its brightest since August. The improvement was limited to manufacturing, however, where confidence reached its highest since May.

Despite the uplift in manufacturing, the overall level of confidence notably continues to be well below long-run averages in both sectors.

The downturn was led by France, where businesses reported the sharpest reduction in activity since March 2013 (excluding the pandemic), thanks to rates of contraction accelerating in both manufacturing and services.

However, output also fell at a sharp and accelerating rate in Germany amid steepening losses for both goods and services.

While the rest of the euro zone as a whole recorded a more muted decline by comparison to the falls seen in France and Germany, output here has now fallen for five successive months as a severe decline in goods production continued to offset only a very modest rise in services activity.

Fibre2Fashion News Desk (DS)