Daily Management Review

The Worst Is Probably Over For Eurozone Factories, According To December PMIs


The Worst Is Probably Over For Eurozone Factories, According To December PMIs
According to a survey released on Monday, the eurozone manufacturing downturn has likely passed its trough as supply chains begin to recover and inflationary pressures ease, resulting in a rebound in optimism among factory managers.
S&P Global's final manufacturing Purchasing Managers' Index (PMI) rose to 47.8 in December from 47.1 in November, matching a preliminary reading but remaining below the 50-point threshold that separates growth from contraction.
An output index, which feeds into a composite PMI due on Wednesday and is considered a good gauge of economic health, also came in at 47.8, up from 46.0 in November, marking the seventh month of sub-50 readings but the highest since June.
Due to the holiday season, the final data was compiled earlier than usual last month.
"A second successive monthly cooling in the rate of loss of factory output brings some cheer for the beleaguered manufacturing sector as we start the new year," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
"Prospects have brightened amid signs of healing supply chains and a marked softening of inflationary pressures, as well as a calming of concerns over the region's energy crisis, thanks in part to government assistance."
While the input and output price sub-indices remained high, they both fell significantly, which will be welcome news for European Central Bank policymakers who have been tightening monetary policy to combat rampant inflation.
With inflationary pressures easing, supply chains healing, and an energy crisis unlikely, purchasing managers became more optimistic, and the future output index increased to 53.8 from 48.8.
"The number of optimists regarding the year ahead has also now exceeded pessimists for the first time since August, hinting at a steady improvement in business confidence," Williamson said.