Eurozone's private sector faces sharpest job cuts in years
According to the latest S&P study, the eurozone's private sector ended the year with a decline, which includes the fastest rate of job reductions in four years. Companies are cutting their workforce due to a drop in orders and economic activity. The crisis is worsening.
The eurozone PMI, published on Monday by S&P, rose to 49.5 points in December from 48.3 points in November. However, it remains below the 50-point mark that distinguishes growth from decline. The service sector saw a slight rebound, while industrial production experienced its steepest decline in a year.
The PMI reading suggests that economic activity in the private sector is decreasing for the second month in a row. Companies are cutting production due to a continued fall in new orders. In the manufacturing sector, the decline in activity was particularly pronounced — marking the twenty-first consecutive month of declines.
Germany and France drag down the EU
The economic downturn in the eurozone predominantly reflects the situation in its two largest economies — Germany and France. Both countries continue to face a decline in economic activity, although the pace slightly eased compared to the previous month. Other eurozone countries, however, recorded robust production growth, achieving their highest expansion rate in six months.
New export orders, including trade within the eurozone, experienced another decline, outpacing the drop in overall orders. While the decrease in foreign orders remained notable, it was the smallest since August, as the rate of contraction in both tracked sectors eased compared to the previous month, according to the report.
The spectre of inflation still haunts the EU. "The situation is quite gloomy"
December saw a noticeable increase in inflationary pressure. Production costs rose faster in four months, with the growth rate nearing the pre-pandemic average.
Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted that at their December meeting, ECB representatives assured that they are keeping a close eye on service sector inflation, which remains significantly above overall inflation. The PMI indicators are clear in this regard. Costs are rising at an increasing rate, marking the third consecutive month of increases. Sales prices have followed suit, indicating that the rising inflation risk persists.
The expert highlights the challenging conditions in the manufacturing sector, noting that production in December dropped at its fastest rate of the year, accompanied by a decline in incoming orders. The ongoing inventory reduction cycle also appears far from over. However, he points to some encouraging signs, citing global PMI data for the industry, which indicated a stabilization of operating conditions in November. This suggests that the downward trend in the eurozone may not persist uninterrupted.
