LONDON (ICIS) – Eurozone manufacturing continued to contract in December 2023, with Purchasing Managers' Index (PMI) reflecting sharp declines in production and employment, but a decline in demand and purchasing. This reflects that the situation is easing.
Some manufacturing sub-indices suggest the worst of the industry's downturn is over, with fewer new orders and easing purchasing activity, according to Hamburg Commercial Bank (HCOB) and index creator S&P Global. That's what it means. Business confidence hit its highest level in eight months.
The HCOB Eurozone Manufacturing PMI was 44.4, up slightly from November's 44.2 and the highest level in seven months. The HCOB Eurozone Manufacturing PMI Production Index fell to 44.4 from 44.6 in November, the lowest level in two months.
Cyrus de la Rubia, chief economist at HCOB, said in a statement: “The decline in new orders reflects the gloom and is retreating at roughly the same pace as last month.”
“Our nowcast model is consistent with this pessimistic trend and strongly suggests a contraction in GDP in the fourth quarter. If true, this paints a bleak picture for the eurozone. The euro area will enter a recession in the third quarter.
“The process of inventory reduction shows no signs of letting up. Purchasing inventories have declined at an accelerating pace for the 11th consecutive month, outpacing the previous month. A pivotal turning point in the inventory cycle marks the start of a recovery. “This is an important factor. Our forecasts place this expected change in the first half of 2024, but current indicators do not yet support this prediction,” Della Rubia added.
However, a growing number of companies are expressing optimism regarding output over the next 12 months. HCOB economists suggested that this optimism may be rooted in expectations of lower interest rates and the potential for lower energy prices.
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