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Eurozone manufacturing decline persists, says survey

ACTIVITY in the eurozone manufacturing sector fell for the fifth successive month in December, but showed a slight improvement on the previous month, BBC reports quoting findings of a closely-watched survey.

The Markit eurozone manufacturing PMI was 46.9, up from November’s 28-month low of 46.4. Any score under 50 represents a contraction.

Markit said production levels and new orders fell in all 17 member nations.

Employment rose in Germany and France, but fell across the bloc as a whole.

Markit said manufacturing growth in the final three months of last year was the weakest since the middle of 2009.

Eurozone manufacturing is clearly undergoing another recession,” said Markit’s chief economist Chris Williamson.

“Despite the rate of decline easing slightly in December, production appears to have been collapsing across the single currency area at a quarterly rate of approximately 1.5% in the final quarter of 2011.”

No country in the eurozone saw an increase in manufacturing activity in December.

Austria recorded the highest score of 49, followed by France on 48.9 and Germany on 48.4.

The survey also found that input prices across the eurozone fell for the third straight month.

Many economists believe the eurozone economy as a whole is heading for recession, after growing by just 0.2% between July and September – the latest figures available.

“Eurozone manufacturers are now very much on the back foot and finding life extremely challenging as domestic demand is hit by tighter fiscal policy across the region, squeezed consumer purchasing power, and heightened eurozone sovereign debt tensions leading to tightening credit conditions and financial market turmoil,” said Howard Archer, of IHS Global Insight.

The research group believes the latest PMI data provides “significant support” to the case for the European Central Bank to cut interest rates again in the next few months.

A poll conducted among leading economists by the BBC last week found that, of the 27 who responded, 25 forecast a return to recession for Europe next year.

Market boost

The latest data comes as Spain’s newly elected centre-right government said the country’s deficit was worse than previously forecast.

On Friday, the government said the deficit in 2011 would be 8% of GDP rather than the 6% predicted by the outgoing socialist government.

On Monday, the country’s new Finance Minister Luis de Guindos said the deficit for the year could be even larger.

However, European markets appeared prepared for the latest downbeat news.

By mid-morning, markets in the largest eurozone economies were up by between 0.7% and 1.3%. Frankfurt’s Dax index was the strongest performer, up by 1.3%.

However, trading was very light, with UK markets closed for a public holiday, which can mean share movements are unrepresentative of general market sentiment.

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