Euro zone manufacturing activity slower than projected in December

news
02 January 2015

Euro zone manufacturing activity grew at a slower pace than first estimated in December, keeping the pressure on the European Central Bank to boost its stimulus campaign, The Wall Street Journal reported.

The headline measure from data firm Markit's monthly survey of purchasing managers of around 3,000 manufacturers was up at 50.6 from 50.1 in November. It was, however, lower than the preliminary estimate of 50.8. A reading over 50 for the index indicates an expansion in activity, while sub 50 levels signal contraction.

According to Markit, for the three months of the fourth quarter, the PMIs came in at their lowest level since the third quarter of 2013. And though Germany rallied slightly, activity in France and Italy declined. The Italian PMI came in the lowest in 19 months.

Ireland continued to outpace the rest of the euro zone, while activity in Spain and the Netherlands continued to expand, although at a slower pace than in recent months.

However, there was room for policy makers to draw comfort with new orders rising for the first time in four months, thanks largely to export contracts - an indication that the weakening euro might finally be benefiting some businesses.

But, according to commentators, a period of very low inflation may be expected to continue as manufacturers once again cut their selling prices, even as their costs fell at the sharpest pace in eight months, reflecting lower oil prices.

Markit economist Oliver Kolodseike was reported as saying that December's survey results have offered some relief, as the PMI edged back into expansion territory and new orders returned to growth.

It was however, too early to say whether or not the manufacturing economy had entered the fast lane again or whether the uptick in the data was just a temporary bright spot, he added.

With oil prices at levels not seen since 2009, input costs fell further in December. The accelerated drop in input prices was a positive development for manufacturers, but added to fears of wider disinflationary pressures, he said.

Germany was able to avoid a recession thanks to a low growth rate of 0.1 per cent in the third quarter following a contraction of 0.1 per cent in April-June.





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