Eurozone manufacturing ends 2023 in continued contraction: S&P Global

The data, categorised by the three primary industrial groups, revealed that intermediate goods producers faced the most severe challenges, a trend consistent throughout the manufacturing sector's downturn, which has persisted for a year and a half.

The increase in the PMI primarily reflected softer deteriorations in Germany and Italy. Notably, France, the second-largest economy in the euro area, recorded the strongest worsening of business conditions in over three-and-a-half years. Greece remained the solitary area of improvement, with growth edging up to a four-month high, as per S&P Global.

The level of factory production across the euro area continued to shrink in December, with the rate of contraction accelerating slightly. Overall, the pace of decline was strong, albeit the second weakest since May. France was the main driver of the latest fall, country-level data showed.

Output continued to be constrained by a lack of new business as demand for eurozone goods decreased once again. Although the decline was the softest for seven months, it was sharp nevertheless. New orders from external customers were also down on the month, extending the current sequence of shrinking export sales to nearly two years.

Sustained weakness in demand conditions led firms to make further progress with backlogs. The volume of work outstanding decreased further, highlighting another month of spare capacity across the euro area manufacturing sector. The rate of depletion, albeit sharp, was the slowest since May. Subsequently, factory employment across the eurozone continued to fall, in line with the trend since last June.

A slower rate of decline was also seen in purchasing activity during December. Although eurozone manufacturing companies continued to cut input buying at a considerable rate, the reduction was the weakest in seven months. Stocks of purchases were depleted more rapidly, however, and to one of the greatest degrees in the survey history. Amid sustained inventory reductions and lower demand for inputs, the latest survey data signalled a further improvement in suppliers’ delivery times. The extent to which vendor performance improved was the smallest in almost a year.

Meanwhile, growth expectations for the coming year improved in December. Overall, eurozone manufacturers were their most confident in the outlook for production since last April, although the prevailing level of optimism was still subdued by historical comparisons.

Turning to prices data, eurozone factory input costs continued to decrease at the end of 2023, as was the case in the previous nine months. This presented manufacturers with a greater allowance over their own pricing decisions, with the latest survey data indicating another month of discounting. That said, the extents to which input prices and output charges fell were the least marked for eight and seven months, respectively.

Fibre2Fashion News Desk (DP)