Eurozone 'set for a winter of recession'

Activity in eurozone factories ended 2023 on a negative note, as it contracted in December for the 18th consecutive month, suggesting recession in the bloc is imminent.

The factory data comes from the HCOB Eurozone Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, which is based on monthly questionnaires sent to manufacturers in Germany, France, Italy, Spain, the Netherlands, Austria, Ireland, and Greece, representing approximately 3,000 private-sector companies.

The manufacturing index, considered a reliable indicator of economic health, experienced a slight decline from 44.6 in November to 44.4 in December, still below the 50 mark that separates growth in activity from contraction.

Responses are used to calculate performance on a scale of one to 100.Greece recorded the highest figure in four months, at 51.3. However, every other country, including Ireland (48.9), Spain (46), Italy (45.3), Netherlands (44.8), Germany (43.3), France (42.1) and Austria (42.0), registered scores below 50. Notably, France's figure reached a 43-month low.

The survey showed output and factory job losses extending for a seventh consecutive month, and the data offered little indication of a strong recovery in an economy that is likely in recession, reported Reuters news agency.

Hamburg Commercial Bank's chief economist, Cyrus de la Rubia, stated that the pessimistic trend strongly suggests a contraction in the GDP of the eurozone in the last quarter.

The eurozone economy contracted by 0.1 percent in the third quarter, and if there is a second consecutive quarter of contraction, it would meet the definition of a recession.

"Amid a relentless slump in the manufacturing sector of the eurozone, the HCOB PMI has shown little improvement compared to November. It paints a bleak picture for the eurozone and would mean that the eurozone entered a recession in the third quarter," de la Rubia said.

According to an early December Reuters poll, the 20-country eurozone is expected to experience a brief and mild winter recession.

Despite the overall contraction in the factory data, there were some positive signs within specific subindices, as the decline in new orders and purchasing activity showed signs of easing and business confidence reached its highest point in eight months, reported the Trading Economics website.

While the new orders sub-index showed a slight improvement, easing from 41.5 to 42.0, it still remained below the crucial 50 mark, as it had throughout 2023.

"The sluggishness of new orders echoes the gloom, retreating almost as swiftly as the previous month," said de la Rubia.