There were glimmers of optimism among struggling European manufacturers last month, as price rises eased, supply chains became more stable and concerns about the region’s energy crisis calmed.
The latest purchasing managers index for the eurozone was at its highest level for three months in December, while confidence and employment edged up to seven-month highs.
Overall, however, the figures reported by S&P Global, the financial information company, continued to paint a grim picture for the manufacturing sector, as “business sentiment remained historically subdued”. At 47.8, the index remained below the 50 mark that separates expansion from contraction.
Manufacturing output fell in December for the seventh month in a row. There continued to be a drop in new orders and weak demand from customers, suggesting that companies will have to cut production further. Manufacturers said it had become easier to source raw materials and, with a dearth of new orders, they turned to tackling incomplete work, with a sharp fall in backlogs during December.
PMI numbers give economists an understanding of whether companies are growing or contracting by providing information about business activity, based on interviews with the person responsible for buying equipment, goods and services for their company.
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S&P said manufacturers would continue to be confronted by strong headwinds in the year ahead, amid bleak economic forecasts, rising interest rates, the likely impact on supply chains from China’s response to the spread of Covid-19 and the conflict in Ukraine.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “A second monthly cooling in the rate of loss of factory output brings some cheer for the beleaguered manufacturing sector as we start the new year. The number of optimists regarding the year ahead has also now exceeded pessimists for the first time since August, hinting at a steady improvement in business confidence.”
