Final European PMI Rose M/M to 50.6 in Dec.; German Output Remains Modest

The eurozone manufacturing sector ended 2014 on a subdued note, as rates of growth for output, new orders and employment all continued to track close to stagnation. At 50.6 in December, the final seasonally adjusted Eurozone Manufacturing PMI was up slightly from November’s low of 50.1, but edged down from the flash estimate of 50.8.

The average PMI reading over the final quarter as a whole (50.4) puts the manufacturing sector on course for its worst growth outcome since the current recovery started in Q3 2013. The quarterly averages for the output and new orders indices are similarly the weakest during that sequence.

December saw the slowest output growth during the current one-and-a-half year period of sustained expansion. However, there was a mild improvement in new order inflows, which rose slightly for the first time in four months. Although domestic market conditions remained lacklustre, the trend in new export business* provided a positive contribution to total order books. The growth rate of new export orders rose to a three-month high.

The performances of the big-three manufacturing nations remained subdued in December. The downturns in France and Italy continued, as both were hit by declining inflows of new business.

France subsequently fell back to the bottom of the PMI league table. Manufacturers there scaled back production to the greatest extent since July, while inflows of new work decreased from both the domestic and non-domestic markets. The Italian PMI meanwhile dipped to a 19-month low.

The performance of Germany also remained subdued, although there were some positive signs as its PMI rose back above the 50.0 no-change mark. Output growth picked up from November’s 17-month low, while new orders and new export orders rose modestly following declines in November.

Elsewhere in the currency union, Ireland, Spain and the Netherlands all reported solid improvements in performance, while Austria and Greece saw modest (yet slower) deteriorations.

Manufacturing employment rose for the fourth successive month in December, with job creation registered in Germany, Spain, the Netherlands, Ireland and Greece (the first increase in Greece for seven months). In contrast, rates of reduction accelerated in France and Italy.

The overall increase in workforce numbers meant firms were able to maintain production growth and make further inroads into backlogs of work. Outstanding business fell for the eighth month running, albeit to a less marked extent than in November.

Cost pressures remained on the downside during December, in many cases due to the ongoing reduction in international oil prices. Average purchasing costs declined to the greatest extent in eight months. Input prices fell at the fastest rates for eight months in both Germany and Austria, and for 17 months in the Netherlands. France also reported a slight decrease in purchasing costs.

Selling prices also fell during the latest survey month, although the pace of decrease was only weak and the slowest during the current four-month sequence of decline. Only Spain and Ireland reported higher output charges, and only marginal increases in both cases.

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