Employment in Euro Area Worsened as Services, Manufacturing Deteriorate
The Euro Area’s manufacturing sector deteriorated further in November, with the Hamburg Commercial Bank (HCOB) Eurozone Manufacturing PMI dropping to 45.2, indicating sharper contractions in production, new orders, purchasing, and inventories.
Employment saw its steepest decline since August 2020, led by Germany and Austria. Weak demand drove aggressive price discounts, while operating costs fell slightly for the third month.
Key economies, including Germany, France, and Italy, faced significant downturns, while Spain and Greece showed slower improvements. Backlogs fell sharply, reflecting persistent overcapacity.
Despite subdued historical levels, business confidence ticked up to a three-month high, signaling cautious optimism for recovery. Eurozone business activity moved back into contraction in November, according to provisional PMI® survey data, the second time in three months in which this has been the case.
Meanwhile, confidence in the outlook for output dropped to the lowest for just over a year. Companies continued to face challenges securing new orders, which decreased for the sixth month running and at a solid pace.
With new business and backlogs of work falling, firms also scaled back workforce numbers, albeit only marginally. Meanwhile, rates of inflation of input costs and output prices ticked up from October, but in both cases were weaker than the average for the year-to-date.
The renewed decline in output was recorded as business activity in the service sector decreased for the first time in ten months, joining manufacturing in contraction territory.
Manufacturing posted the faster pace of reduction, however, as production declined at a marked pace that was sharper than was seen in October.
Differences in performance within the euro area were again evident midway through the final quarter of the year. Germany and France each saw output decrease to larger extents than in October, with France posting the fastest fall in activity since January.
On the other hand, the rest of the Eurozone continued to see business activity increase, albeit the rate of expansion was only slight and the slowest in the current 11-month sequence of growth.
Output has now decreased in two of the past three months. Although modest, the rate of contraction in November was the most marked since January.
For the first time since the opening month of the year, both monitored sectors saw output decrease in November as services joined manufacturing in contraction.
The reduction in services activity was only slight, however, and much weaker than that seen in manufacturing, where the pace of decline quickened from October. Manufacturing production has now decreased in each of the past 20 months.
Falling business activity reflected a waning demand environment. New orders decreased for the sixth month running in November, and at the fastest pace in 2024 so far.
Sharper reductions in new business were seen across both manufacturing and services. In line with the picture for total new orders, new business from abroad (which includes intra-Eurozone trade) also declined to the largest extent since the end of last year. New export orders were down sharply, and to a greater degree.
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