Eurozone factory downturn eases in November, inflationary pressures moderate

THE downturn in manufacturing activity across the eurozone eased in November, suggesting that the harsh winter the bloc’s factories are facing may not be as bad as initially feared, said a survey.

S&P Global’s final manufacturing Purchasing Managers’ Index (PMI) rose to 47.1 from October’s 46.4. However, it was below a preliminary reading of 47.3, and under the 50 mark which separates growth from contraction.

An index measuring output, which feeds into a composite PMI due on Monday (Dec 5) and viewed as a guide to economic health, rose to 46 from 43.8, marking its sixth month of sub-50 readings.

Chris Williamson, chief business economist at S&P Global, said: “The PMI signals some welcome moderation in the intensity of the eurozone manufacturing downturn in November, which will support hopes that the region may not be facing a winter downturn as severe as previously anticipated by many.”

However, new orders fell sharply on the suggestion that the industry will not be facing a quick revival. A chunk of the activity was generated by the completion of work backlogs. The new orders index remained firmly sub-50 at 40.7, but it was still above October’s 37.9 reading.

“There also seems to be no immediate respite in sight for the plight of manufacturers, given that order books continue to deteriorate at a worryingly steep pace, contracting at a far faster rate than firms are cutting production,” Williamson said.

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Nonetheless, there were signs of inflationary pressures easing – likely welcome news to policymakers at the European Central Bank. While they remain high, both the input and output prices indexes dropped substantially.

Official preliminary data showed on Wednesday that inflation in the bloc was a lower-than-expected 10 per cent in November. However, it was still five times the European Central Bank’s target of 2 per cent.

The central bank has been raising interest rates to tame price rises; it is expected to add another 50 basis points later this month. REUTERS