By Indradip Ghosh
Dec 1 (Reuters) – Euro zone manufacturing activity slipped back into contraction territory in November on weakening demand that forced firms to cut jobs at the quickest rate in seven months, a private survey showed.
The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 49.6 in November from 50.0 in October, marking a five-month low and slightly below a preliminary estimate of 49.7.
Readings above 50.0 indicate growth in activity, while those below that level point to a contraction.
New orders declined after stagnating in October. Export orders fell for the fifth consecutive month, highlighting persistent challenges in international markets.
In response to weakening demand, manufacturers cut jobs at the fastest rate since April, while stocks of finished goods depleted by the largest margin since July 2021.
“The current picture of the euro zone is sobering, as the manufacturing sector is unable to break out of stagnation and is even tending towards contraction,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
“In terms of the number of countries in which industry is growing again, the outlook for the euro zone looks quite reasonable… However, when the sizes of these economies are taken into account, the situation looks completely different, as it is the two largest economies whose industries slipped even deeper into recession in November.”
In Germany and France, PMI readings fell to nine-month lows of 48.2 and 47.8, respectively. Meanwhile, six other monitored countries reported growth, with Ireland leading at 52.8, followed by Greece at 52.7.
Manufacturing output continued to expand but at a much slower pace, with the output index dropping to 50.4 from 51.0 in October – its weakest reading in nine months.
Input costs rose at the sharpest rate since March following a months-long period of relatively stable prices. But firms absorbed most of those pressures with output prices falling slightly.
Despite the overall weakening conditions, business confidence improved to its highest level since June.
“In this regard, the mood in Germany has improved somewhat, and in France there has even been a shift from pessimism to optimism,” de la Rubia added.
“If one believes the saying that ‘half of economics is psychology,’ then this increased confidence is an indication that things will improve in the coming year.”
A stable economic outlook, alongside overall inflation steadily around the European Central Bank’s 2% target, will keep interest rates steady for a long period, a Reuters poll showed last month.
(Reporting by Indradip Ghosh in Bengaluru; Editing by Toby Chopra)
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