Manufacturing activity in the euro zone returned to contraction in November due to weakening demand, prompting firms to reduce staffing levels at the fastest pace in seven months, according to a private sector survey.
The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI) from S&P Global dropped to 49.6, down from October’s neutral reading of 50.0 and hitting a five-month low, coming in slightly below the preliminary estimate of 49.7.
New orders shrank in November after remaining flat the previous month, and export orders declined for the fifth consecutive month, underscoring ongoing difficulties in international trade. As demand weakened, manufacturers responded by cutting jobs at the sharpest rate since April. Stocks of finished goods also fell at the quickest pace since July 2021.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted that the overall picture for the euro zone manufacturing sector remains lackluster, with little sign of escaping stagnation and an increasing drift into contraction.
While more countries within the euro zone now show industry growth, the trend is overshadowed by deepening recessions in the region’s two largest economies—Germany and France. In November, German and French PMI readings fell to nine-month lows at 48.2 and 47.8, respectively. In contrast, six other eurozone countries recorded growth, led by Ireland at 52.8 and Greece at 52.7.
Manufacturing output continued to rise, but growth slowed considerably, with the output index easing to 50.4 in November from 51.0 the month before, marking its weakest performance in nine months. Input costs surged at the fastest rate since March after a period of stable pricing. Nevertheless, manufacturers largely absorbed these higher costs, resulting in a slight drop in output prices.
Despite these challenges, business confidence reached its highest point since June. Sentiment has improved in Germany, and there has been a shift from pessimism to optimism in France, suggesting that rising confidence could point toward an economic upturn in the coming year.
A Reuters poll conducted last month indicated that a stable economic outlook, together with inflation remaining near the European Central Bank’s 2% target, is expected to keep interest rates unchanged for an extended period.
