There was a slight improvement in European manufacturing PMI for December but it is a meaningless illusion given prolonged contraction coupled with the fact new orders are sinking much faster than output.
The PMI is a diffusion index with reading below 50 in contraction, above 50 in expansion.
MarketWatch reports PMI data underline euro-zone recession fears
The final December reading of the Markit purchasing-managers index for the manufacturing sector rose to 46.9 from a 28-month low of 46.4 in November, matching an earlier estimate.
“Euro-zone manufacturing is clearly undergoing another recession,” said Chris Williamson, chief economist at Markit. “Despite the rate of decline easing slightly in December, production appears to have been collapsing across the single-currency area at a quarterly rate of approximately 1.5% in the final quarter of 2011.”
For the second month in a row, all nations covered by the survey reported a decline in output.
Williamson said it was particularly worrying to see new orders falling at a far faster rate than output. That indicates firms have relied on orders placed earlier in the year to sustain current production levels, he said.
- Germany 48.4
- France 48.9
- Netherlands 46.2
- Austria 49
- Italy 44.3
- Spain 43.7
- Greece 42.0
The Eurozone New Orders component came in at 43.5 so expect a plunge across the board in future PMI readings as manufacturing output contracts further to keep up with orders.
New austerity measures in Italy, Spain, Portugal, France, and Greece have yet to bite, and they will. Economists think the European recession will be over mid-year. I think they are in fantasy-land. More likely, the US follows Europe into recession.
Mike “Mish” Shedlock
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