European Manufacturing Is Still In The Doldrums

Factories across the Eurozone continued to see a decline in activity as 2019 came to a close. The Purchasing Managers’ Index (PMI) compiled by IHS Markit was below the 50 mark that separates growth from contraction for the eleventh consecutive month.

At 46.3 for December, the PMI was lower than November’s 46.9 but higher than the preliminary estimate of 45.9.

Despite outperforming the initial forecast, few insiders are taking much comfort from the December figure. An indicator that measures output and then feeds into a composite PMI recorded a decline from 47.4 to 46.1, a level of monthly output fall that hasn’t been since 2012.

Empty Order Books

Companies have been working through their backlog to maintain activity, a further indication that optimism remains in short supply. Germany was again the most sluggish Eurozone member.

Italy and the Netherlands had their steepest contractions in over six years, while France bucked the trend with a small increase.

No Relief Yet For The UK

Beyond the Eurozone, UK manufacturing output declined at its equally fastest rate for the past seven years. New orders to British factories from both domestic and overseas clients have fallen sharply.

There had been some hope for a modest return of confidence with the easing of global trade tensions, the European Central Bank monetary stimulus and a decisive election result in the UK bringing some clarity to the Brexit process.

The pound and the euro both weakened upon the release of the reports.

Asia More Positive

The situation in Europe contrasts with that in Asia where the outlook appears moderately more optimistic. Purchasing manager indexes in Taiwan, South Korea and Thailand all moved above 50 in December. Indonesia remained slightly below 50, Malaysia right on it.

The manufacturing sector in China expanded modestly, prompted by a possible trade agreement with the US that should signal some relief over tariffs. The Peoples’ Bank Of China also signalled continued action to support the sector in the years ahead.

Export reliant Singapore was the most sluggish developed Asian economy in December as trade-reliant sectors found life difficult.