Euro Zone Manufacturing PMI Indicates Further Contraction, Signals Recession


  • The final Eurozone Manufacturing Purchasing Managers’ Index (PMI) by HCOB, assembled by S&P Global, marginally increased to 44.4 in December from November’s 44.2.
  • The reading, however, stayed substantially under the 50 mark which differentiates growth in activity from contraction.
  • The measurement of output, a significant indicator of economic health, declined to 44.4 from November’s final reading of 44.6.
  • The negative trend suggests a contraction in Eurozone’s GDP in the last quarter.
  • A continuous dip in new order was observed though it eased marginally last month.

HCOB Eurozone PMI Assessment

The end of month assessment from HCOB’s Eurozone Manufacturing PMI, put together by S&P Global, showed a slight rise to 44.4 in December, up from 44.2 in November. This continues to be well beneath the watershed 50 mark that separates expansion from contraction of activities.

Forecasts initially predicted no deviation from November’s position.

Output Index and Economy Health

Index measurements of output, contributing to a combined PMI anticipated this Thursday and considered a fitting barometer of economic wellbeing, decreased to 44.4 from November’s final score of 44.6. Still, it surpassed the 44.1 flash estimate.

Suggestion of a Recession

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, suggested a strong indication of Eurozone GDP’s contraction in the prior quarter. After a recorded 0.1% contraction in the economy in the third quarter, a second consecutive quarter of contraction would fit the technical definition of recession. “The persistent downturn in Eurozone’s manufacturing sector leaves a dire outlook for the bloc, hinting at a possible onset of recession in the third quarter,” mentioned de la Rubia.

Continuing Decline of New Orders

The consistent downturn of new orders saw a slight alleviation last month but remained under 50, as it had been throughout 2023. The secondary index escalated slightly to 42.0 from 41.5. De la Rubia added, “The lethargy of new orders resonated with the prevailing pessimism, receding nearly as quickly as the preceding month.”

December Activity Encompasses Completion of Old Orders

A considerable portion of December’s activity was indicated by the fulfillment of overdue orders, according to the backlog of work index. This suggests that manufacturers are unlikely to foresee an immediate turnaround, leading to a seventh consecutive month of workforce reduction.

Given the present scenario, forex traders should watch for the potential impact on the currency market. Conditions like these could influence the relative strength of the Euro and present new trading opportunities.

PIP Penguin