LONDON — Optimism among factory managers shows Monday that weak manufacturing activity in the euro zone is likely to have crossed a trough as supply chains begin to recover and inflationary pressures ease. I regained my perspective.
The S&P Global Final Manufacturing Purchasing Managers Index (PMI) bounced from 47.1 in November to 47.8 in December, in line with preliminary figures, but still below the 50 mark that separates growth from contraction.
The index that measures output, released Wednesday and feeds the Composite PMI, considered a good measure of the health of the economy, also rose to 47.8 from 46.0 in November, the seventh month of reading below 50. I marked it, but it’s the highest since June.
Final data was compiled earlier than usual last month due to the holiday season.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The decline in the factory production loss rate for the second month in a row should bring some cheer to the struggling manufacturing sector. It brings,” he said.
“Prospects are brighter as supply chains recover, inflationary pressures have eased significantly and concerns over the region’s energy crisis have eased, partly due to government support.”
The Input Price and Output Price sub-indexes remained high, but both fell significantly. This is perhaps welcome news for policymakers at the European Central Bank, who are trying to quell rampant inflation by tightening monetary policy.
With inflationary pressures easing, supply chains recovering and the energy crisis likely averted, purchasing managers became more optimistic and the future production index jumped from 48.8 to 53.8.
“Optimism about next year also outstripped pessimism for the first time since August, suggesting business confidence is steadily improving,” Williamson said. ‘ said.