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January 2, 2013 10:14 am
Europe’s manufacturing sector entered 2013 in mostly downbeat fashion as new data revealed there had been no significant easing in the weak level of output and orders.
A eurozone manufacturing purchasing managers’ index compiled by Markit fell in December to 46.1 from 46.2 in the previous month, a steeper decline than the initial estimate of 46.3 published on December 14. A reading below 50 indicates a contraction.
The eurozone debt crisis has hurt business confidence in the single-currency bloc, making companies reluctant to invest in new capacity or jobs. These problems have been compounded by falling demand in key export markets such as China and worries over tax and spending negotiations in the US. As a result, the eurozone economy is expected to have contracted for a third successive quarter in the final three months of 2012.
“The eurozone manufacturing sector remained entrenched in a steep downturn at the end of the year,” Chris Williamson, chief economist at Markit, said. “The region’s recession therefore looks likely to have deepened, possibly quite significantly, in the final quarter.
“Manufacturers look to be in for another tough year in 2013, though prospects have brightened a little, as producers should benefit from signs of stronger demand in key export markets such as the US and China," he said.
In Germany, Europe’s largest economy, manufacturing activity contracted for the tenth consecutive month, according to a PMI index which declined in December to 46.0 from 46.8 in the prior month.
Angela Merkel, German chancellor, warned in a new year address that the crisis was “far from over”.
“The reforms we have agreed to are beginning to take effect. But we still need a lot of patience,” she said.
Peter Loescher, chief executive of Siemens, the country’s biggest manufacturer, said he expected headwinds and waning economic growth in 2013, according to an interview with the newspaper Frankfurter Allgemeine Zeitung.
Manufacturing conditions in France also contracted for a tenth month as a similar PMI survey recorded a reading of 44.6, a fraction better than the prior month.
In Spain, business conditions worsened for the 20th consecutive month. Its PMI indicator dropped to 44.6 per cent from 45.3 per cent in November. Ireland, which has implemented structural reforms to help drive an export-led recovery, was the only member of the 17-country currency bloc to register growth in its manufacturing sector with a reading of 51.4. Still, this was down from 52.4 in the prior month.
The one exception to the continent’s gloomy picture was the UK, where factory output in December strongly beat forecasts and grew at its fastest pace since September 2011. The Markit index rose to a 15-month high of 51.4 from an upwardly revised 49.2 in November.
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