Eurozone PMI contracts to sub-50 for 5th month in a row: S&P Global

07 Dec '22

2 min read

Pic: Shutterstock

Eurozone’s output levels shrank for the fifth consecutive time, as the seasonally adjusted composite purchasing managers' index (PMI) reading in November 2022 was 47.8, as per a survey by S&P Global. Although November’s reading was up from 47.3 in October, and therefore indicated a softer rate of decrease, it marked the longest downturn in the euro area economy since the recession between 2011 and 2013.

Notably, a pronounced softening of cost pressures in the manufacturing sector helped bring the overall rate of input price inflation down to its lowest since September 2021. Output charges were subsequently lifted to a weaker extent. Business confidence improved slightly, marking a further step-up from September’s 28-month low. Nevertheless, optimism remained weak, according to S&P Global eurozone composite PMI.

The latest survey data also pointed to a softer deterioration in demand for goods and services, although backlogs of work fell at a stronger pace in a sign of alleviating capacity constraints. Employment continued to rise, although the rate of job creation was the weakest in almost two years.

Output levels across the manufacturing sector contracted in November. Subdued demand conditions were a considerable drag on economic activity across the euro area once again, while the energy crisis also dampened output at some companies.

For the first time since May 2020, combined manufacturing and services output fell in each of the euro area nations where composite PMI data are available. Germany remained the worst performer in November, although the downturn here eased as activity fell at the weakest pace since August. Softer contractions were also seen in Italy and Spain, although France and Ireland recorded their first declines in output since February 2021.

While the pace of reduction softened from October’s 23-month record, it was still strong overall. Factory order book volumes sank sharply and compared with a more modest reduction in the demand for services, according to the survey.

Capacity pressures subsided further in November, as evidenced by a fifth monthly fall in the volume of work outstanding. Moreover, the rate of backlog depletion was the fastest in two years.

The survey’s price gauges indicated receding inflationary pressures across the euro area. Input costs rose sharply, but to the softest extent since September 2021. The rate of input price inflation across the manufacturing sector eased notably in November. Output charges meanwhile rose at the weakest pace in three months.

Fibre2Fashion News Desk (DP)

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