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Eurozone manufacturing downturn worsens in December 2019, led by German decline

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Eurozone manufacturing downturn worsens in December 2019, led by German decline

The eurozone's manufacturing sector downturn deepened at the end of 2019 amid accelerated declines in output and new orders, data from IHS Markit showed.

The bloc's final manufacturing Purchasing Managers' Index, or PMI, dropped to 46.3 in December 2019 from 46.9 in the previous month. A reading below 50 indicates contraction, while one above it indicates expansion.

Performance in the intermediate and investment goods sectors led the overall decline in the final month of 2019, while consumer goods recorded marginal growth for the first time since August 2019. Output fell for the 11th consecutive month, while new orders also declined despite a slower reduction in new export sales.

Business sentiment in the sector improved for all countries in the eurozone, except France and Greece. However, "a return to growth remains a long way off given that new order inflows continued to fall at one of the fastest rates seen over the past seven years," according to Chris Williamson, chief business economist at IHS Markit.

"The ability of the wider economy to avoid sliding into a downturn in the face of such a steep manufacturing contraction remains a key challenge for the eurozone as we head into 2020," Williamson added.

Germany's manufacturing sector was the worst performer in the bloc, ending 2019 deeper in contraction territory as the relevant PMI dropped to 43.7 during December 2019 from 44.1 in November 2019. Production decline accelerated during the last month of 2019, while new orders fell at the slowest pace as compared with the rest of the year.

French factory activity growth eased to a three-month low during December 2019 amid a renewed contraction in new orders. The country's manufacturing PMI dropped to 50.4 in December 2019 from 51.7 in the previous month.

In Italy, manufacturing sector output declined at the fastest pace since April 2013, with the corresponding PMI dropping to 46.2 from 47.6 in November 2019.