BLBG: Euro-Area Manufacturing Near Stagnation as ECB Readies Stimulus
Euro-area manufacturing expanded less than initially estimated in December as growth rates for output, new orders and employment remained near stagnation.
A final reading of a Purchasing Managers’ Index for the industry stood at 50.6 in December, London-based Markit Economics said today. While that’s up from a 17-month low of 50.1 in November, it’s below a 50.8 estimate released on Dec. 16 and barely above the mark of 50 signaling expansion.
European Central Bank President Mario Draghi is trying to win consensus for more stimulus for the euro area. While former crisis countries such as Spain and Ireland are seeing stronger factory output on the back of increased exports, sanctions against Russia are increasingly affecting companies and the currency bloc’s largest economies -- Germany, France and Italy - - are struggling to expand.
“The crisis in Ukraine and a renewed lack of confidence in the ability of euro-area policymakers to revive the region’s economy appear to have been the main catalysts to fuel increased economic uncertainty, causing companies to grow more risk averse,” said Chris Williamson, chief economist at Markit. “We should hopefully see growth pick up in coming months” as lower oil prices help reduce costs for manufacturers and boost consumer spending, he said.
Oil Prices
The cost of oil fell by more than 40 percent last year amid a global supply glut. While the slide is poised to push euro-area inflation below zero, aggravating concerns that too-low price expectations will become entrenched, Bundesbank President Jens Weidmann has highlighted the stimulative effect of cheaper energy.
A German factory gauge rose to 51.2, signaling renewed expansion, after unexpectedly slipping to 49.5 in November, according to today’s report. In France, activity has contracted since May, while a measure for Italy dipped to a 19-month low. Ireland, Spain and the Netherlands all reported “solid” improvements in performance, Markit said.
“The overall weakness of the euro-zone PMI supports the case for more stimulus,” Williamson said. Still, “some policymakers may see the signs of life in countries such as Ireland and Spain as indications that existing policy measures are already taking effect and more patience is needed before new measures are instigated,” he said.
To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net
To contact the editors responsible for this story: Fergal O’Brien at fobrien@bloomberg.net; Paul Gordon, Angela Cullen
