Despite Ongoing Sector Challenges, Eurozone Manufacturing PMI Increases

• Eurozone PMI remains at 44.2, demonstrating ongoing contraction in manufacturing.
• While there are milder decreases in orders, job losses have escalated.
• Recovery patterns differ across the major economies of the Eurozone.

Eurozone Manufacturing Sector’s Struggles Persist

In November, the Eurozone manufacturing sector continued to grapple with prolonged declines, despite some relief in production, new orders, and inventories. The HCOB Eurozone Manufacturing PMI registered at 44.2, reaching a six-month peak. This figure indicates a sustained contraction but presents a slightly improved perspective compared to October's 43.1.

Amid ongoing challenges, there were reduced declines in new orders, stocks, and purchasing activity. However, the industry faced escalating job losses, marking the most pronounced employment downturn since August 2020. Conversely, input costs notably decreased, enabling manufacturers to decrease selling prices for the seventh consecutive month. This trend reflects a gradual moderation in both input cost and output charge deflation rates.

The downturn was prevalent, with six of the eight nations surveyed in the PMI report showing decreases. Austria, Germany, and France experienced the most significant declines, although all three exhibited signs of relief. Encouragingly, Greece and Ireland reported growth, with Greece reaching a three-month high. The consumer goods sector displayed greater resilience compared to intermediate and investment goods, a typical trend during recessions.

Looking ahead, business confidence demonstrated improvement, reaching a three-month high, but the overall outlook remains cautious. Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that the current situation is not yet robust enough to signal a clear upward trend. Although new orders saw a small increase, reaching a six-month high, it's premature to proclaim a definitive positive shift.

Recovery trends vary significantly among the primary Eurozone economies. Germany shows indications of easing output declines, while countries like Italy and Spain are encountering deepening challenges. A collective and synchronized enhancement across national PMI indices will likely be necessary for a robust and self-reinforcing recovery in the Eurozone manufacturing sector, which is expected to gain momentum in the coming year.