Dramatically reduced manufacturing output has left the Eurozone in recession, a new report has warned – with France at its lowest ebb for more than three years.
Dr Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank (HCOB), said what he called a “relentless slump” spells a “bleak picture”.
And he suggested the monetary union slid into recession in the third quarter of last year.
The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI) survey indicates the sector “remained ”stuck in contraction” at the end of 2023, with output continuing to fall and factory job losses extending into a seventh successive month.
The monthly analysis, compiled by S&P Global, is based on responses to questionnaires sent to survey panels of manufacturers in Germany, France, Italy, Spain, the Netherlands, Austria, Ireland and Greece, totalling around 3,000 private sector companies.
Responses are used to calculate performance on a scale of one to 100, the higher the better. Greece’s figure of 51.3 is the highest in four months, but every other country (Ireland 48.9, Spain 46, Italy 45.3, Netherlands 44.8, Germany 43.3, France 42.1 and Austria 42.0) is below 50. The figure for France is at a 43-month low, while the figure for the 19-member eurozone as a whole is 44.4.
Dr de la Rubia said: “Amid a relentless slump in the manufacturing sector of the Eurozone, the HCOB PMI has shown little improvement compared to November.
“This indicates a sustained decline in both activity and demand for manufactured goods.”
The sluggishness of new orders “echoed the gloom”, Dr de La Rubia continued.
He explained: “Our Nowcast model aligns with this pessimistic trend, strongly suggesting a contraction in GDP for the fourth quarter.
“If this holds true, it paints a bleak picture for the Eurozone and would mean that the Eurozone entered a recession in the third quarter.”
What Dr de La Rubia called the “de-stocking process” was showing no signs of letting up.
He added: “Stocks of purchases are shrinking at an accelerated pace and for the eleventh straight month, surpassing the rate observed in the previous month.
“The pivotal turning point in the inventory cycle is a key factor for initiating a recovery.
“Our projection places this anticipated shift in the first half of 2024, although the present indicators do not yet support this expectation.”
A growing number of firms were voicing optimism about their future output over the next 12 months, likely a reflection of their belief in a possible cut in interest rates, Dr de la Rubia acknowledged.
However, referring to Germany, France, Italy and Spain, he continued: “As for the top four eurozone economies, December’s ranking by manufacturing sector performance made for ugly reading.
“The least ugly was Spain – Here the PMI is signalling a fall of economic activity that is less pronounced than in Italy, whose industry, in turn, is shrinking at a slower pace than Germany’s.
“France is carrying the red lantern.”
Britain’s economy is poised to outstrip that of Germany in the coming years, with European countries hampered by the sluggish eurozone, economists at UBS predicted last week.
The investment bank’s experts believe Europe’s economic powerhouse will see modest growth of 0.5 percent in 2024, and 0.8 percent the year after, with Britain’s economy set to grow by 0.6 percent and 1.5 percent respectively during the same period.
