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2 Jan 2015
Eurozone manufacturing PMI ends the year on a subdued note
FXStreet (London) - The final seasonally adjusted Eurozone Manufacturing PMI reading of the year showed the eurozone manufacturing sector ended 2014 on a subdued note, as rates of growth for output, new orders and employment all continued to track close to stagnation. According to Markit, t 50.6 in December, the final seasonally adjusted Eurozone Manufacturing PMI was up slightly from November’s low of 50.1, but edged down from the flash estimate of 50.8.
The report showed that the average PMI reading over the final quarter as a whole (50.4) puts the manufacturing sector on course for its worst growth outcome since the current recovery started in Q3 2013. The quarterly averages for the output and new orders indices are similarly the weakest during that sequence.
According to Markit, December saw the slowest output growth during the current one-and-a-half year period of sustained expansion. However, there was a mild improvement in new order inflows, which rose slightly for the first time in four months. Although domestic market conditions remained lacklustre, the trend in new export business provided a positive contribution to total order books. The growth rate of new export orders rose to a three-month high.
Chris Williamson, Chief Economist at Markit said: “Eurozone factory activity more or less stagnated again in December, rounding off a year which saw an initial, promising-looking upturn fade away and stall in the second half of the year. The weakness of factory output, combined with the subdued service sector growth signalled by the flash PMI, suggests the eurozone economy grew by just 0.1% in the fourth quarter.
“The crisis in Ukraine and a renewed lack of confidence in the ability of euro area policymakers to revive the region’s economy appear to have been the main catalysts to fuel increased economic uncertainty, causing companies to grow more risk averse and pull back on expansion plans.
“Some promising signs of life persist, notably in Spain, the Netherlands and Ireland, where factory output is rising largely on the back of increased exports. It’s a very different story in France, Italy, Austria and Greece, where falling order books are weighing on factory production. The ongoing weakness of German manufacturing also remains major source of concern, but there are signs that order book growth could be turning around, with inflows of new work edging higher for the first time in four months.
“We should hopefully see growth pick up in coming months. Lower costs, linked to falling oil prices, are helping manufacturers to reduce their selling prices, and the drop in fuel prices should also boost consumer spending.
“Expectations have risen that the ECB will also announce more aggressive policy stimulus in the New Year once it has had time to assess current policy initiatives. The overall weakness of the Eurozone PMI supports the case for more stimulus, though some policymakers may see the signs of life in countries such as Ireland and Spain as indications that existing policy measures are already taking effect and more patience is needed before new measures are instigated.”
The report showed that the average PMI reading over the final quarter as a whole (50.4) puts the manufacturing sector on course for its worst growth outcome since the current recovery started in Q3 2013. The quarterly averages for the output and new orders indices are similarly the weakest during that sequence.
According to Markit, December saw the slowest output growth during the current one-and-a-half year period of sustained expansion. However, there was a mild improvement in new order inflows, which rose slightly for the first time in four months. Although domestic market conditions remained lacklustre, the trend in new export business provided a positive contribution to total order books. The growth rate of new export orders rose to a three-month high.
Chris Williamson, Chief Economist at Markit said: “Eurozone factory activity more or less stagnated again in December, rounding off a year which saw an initial, promising-looking upturn fade away and stall in the second half of the year. The weakness of factory output, combined with the subdued service sector growth signalled by the flash PMI, suggests the eurozone economy grew by just 0.1% in the fourth quarter.
“The crisis in Ukraine and a renewed lack of confidence in the ability of euro area policymakers to revive the region’s economy appear to have been the main catalysts to fuel increased economic uncertainty, causing companies to grow more risk averse and pull back on expansion plans.
“Some promising signs of life persist, notably in Spain, the Netherlands and Ireland, where factory output is rising largely on the back of increased exports. It’s a very different story in France, Italy, Austria and Greece, where falling order books are weighing on factory production. The ongoing weakness of German manufacturing also remains major source of concern, but there are signs that order book growth could be turning around, with inflows of new work edging higher for the first time in four months.
“We should hopefully see growth pick up in coming months. Lower costs, linked to falling oil prices, are helping manufacturers to reduce their selling prices, and the drop in fuel prices should also boost consumer spending.
“Expectations have risen that the ECB will also announce more aggressive policy stimulus in the New Year once it has had time to assess current policy initiatives. The overall weakness of the Eurozone PMI supports the case for more stimulus, though some policymakers may see the signs of life in countries such as Ireland and Spain as indications that existing policy measures are already taking effect and more patience is needed before new measures are instigated.”