January 2, 2019 / 9:22 AM / 2 years ago

Euro zone factories ended 2018 on a low note: PMI

LONDON, (Reuters) - Euro zone manufacturing activity barely expanded at the end of 2018 in a broad-based slowdown, according to a survey which showed scant signs for optimism as the new year begins.

The disappointing survey comes just after the European Central Bank ended its 2.6 trillion euro asset purchasing scheme and is likely to make uncomfortable reading for policymakers.

IHS Markit’s December final manufacturing Purchasing Managers’ Index fell for a fifth month, coming in at 51.4 from November’s 51.8, matching a flash reading but barely above the 50 level separating growth from contraction.

That was its lowest reading since February 2016 but an index measuring output, which feeds into a composite PMI that is seen as a good gauge of economic health, nudged up to 51.0 from 50.7.

“A disappointing December rounds off a year in which a manufacturing boom faded away to near-stagnation,” said Chris Williamson, chief business economist at IHS Markit.

“The weakness of the recent survey data in fact raises the possibility that the goods producing sector could even act as a drag on the overall economy in the fourth quarter, representing a marked contrast to the growth surge seen this time last year.”

Findings in a December Reuters poll suggested the chances of a recession this year, while still low, have crept up to 20 percent from 15 percent previously.

Earlier PMI surveys showed Italy remained in contraction territory and was joined by France, where data showed a first deterioration in operating conditions for 27 months.

Manufacturing growth in both Germany and Spain was modest, easing in both to the weakest in around two-and-a-half years.

A worker welds at a Portuguese exporting factory in Pontinha, on the outskirts of Lisbon March 18, 2013. REUTERS/Jose Manuel Ribeiro

Suggesting little hope for January, new orders across the bloc fell at their sharpest rate in over four years in December, backlogs were run down for a fourth month and hiring remained modest.

This meant firms were at their least optimistic in six years. The future output index dropped to 56.0 from 56.3.

“Continued worries over global trade, ongoing political uncertainties and tightening financial conditions all served to undermine confidence during December,” Williamson said.

Editing by Hugh Lawson

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