Euro area’s manufacturing PMI index rises in November, but hints at ongoing contraction
Manufacturing sector in the euro area continued to contract in November; however, it shrank at the slowest rate for three months. The IHS Markit Eurozone manufacturing PMI rebounded to 46.9 in November, a rise from October’s 45.9. Whilst a relative improvement, the PMI nonetheless, stayed well below the 50 mark and extended the current period of contraction to 10 months. At the market groups level, both the intermediate and investment goods sectors stayed inside contraction territory in November, although in each case rates of fall were softer. Operating conditions for consumer goods producers stayed the same compared to October.
Out of the eight nations covered by the survey, only France and Greece recorded manufacturing growth on a sequential basis in November. Germany continued to be at the bottom of the table, in spite of recording its best PMI reading in five months. Austria and Spain were the next worst performing, but similarly recorded weaker rates of contraction, whilst Italy saw its lowest PMI print for eight months. Marginal contractions were recorded in Ireland and the Netherlands, although the latter recorded a first contraction since June 2013.
At the aggregate euro area level, ongoing declines in output and new orders were seen again. However, the pace of contraction was the slowest in three months, whilst new work recorded its mildest fall since June. However, reduction in new work in November maintained a run of contraction that started in October 2018. A similar trend was recorded for new export orders, which also dropped for the 14th straight month but at the weakest rate since June.
Spare capacity remained prevalent in the manufacturing economy in November, as hinted by a 15th successive monthly reduction in work outstanding. In spite of easing to the slowest since February, the pace of contraction stayed marked ad helped to explain another fall in employee numbers. Job losses were again most marked in Germany and Austria. On the contrary, jobs growth was seen in Greece, France and the Netherlands. Manufacturers continued to reduce their purchasing activity in November, preferring instead to focus on utilizing existing stocks in production wherever possible. There was subsequently little pressure on vendors, who were able to improve their delivery performance for the ninth straight month.
A lack of any marked supply side pressures was also seen in prices data. Input costs dropped sharply, and at a pace just slightly slower than October’s 43-month record, in the midst of reports of lower prices being paid for inputs such as metals and plastics.
Manufacturers, faced with falling costs, weaker underlying demand and rising competitive pressures, cut their own charges for a fifth consecutive month. Moreover, the pace of discounting was the sharpest recorded by the survey since April 2016. Finally, there was a marked rebound in business confidence to a five-month high in November as confidence continued to recover from August’s near seven-year low.
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