As a whole, the decline in output, new orders, and inventories eased in November but the downturn in the manufacturing sector remains strong in the euro area. The thing to note about the report this month is that employment conditions are starting to be hit much harder and that could show up in the labour market data in the months ahead. HCOB notes that:

“November has not been the prettiest, and this does not refer only to the weather but also to the situation in the manufacturing sector of the eurozone. Output is still on the decline, and firms have trimmed their staff for a sixth straight month. Sure, almost all the sub-indices have perked up a bit. However, the improvements are mostly timid, lacking the dynamism needed to declare an upward trend.

“The consumer goods sector seems to be in a somewhat better position than intermediate and investment goods. This is a familiar pattern in recessions, where a significant portion of private consumption tends to maintain its stability. In contrast, the cyclical nature of intermediate and investment goods exposes them to economic downturns. The script might flip when the tide changes, with these sectors potentially outpacing consumer goods in a manufacturing recovery. Yet, the current state of the PMI indexes suggests that this turning point might still be a distance away.

“Could we take a glimmer of hope from new orders? The corresponding index, stagnant at more or less 39 points for a four-month stint, has finally made a move, reaching a six-month high. As one-month shifts demand caution, it is prudent to hold off on declaring this to be a trend until we see another month or two of upward movement.

“While the downturn is broadly based across the eurozone, dynamics differ among the top four economies of the currency union. Germany stands out as the single country where the fall in output is softening, while the others are experiencing a deepening of the crisis. In terms of new orders, Germany, France, Italy and Spain witnessed slowdowns in new order declines, but to varying degrees. These heterogeneous movements show that the recovery, which will kick in eventually next year in our view, might encounter some resistance in gaining momentum. A crucial barometer for the recovery's onset will likely be a more synchronized upward movement in the economies PMI indexes, leading to a self-reinforcing reciprocal push among countries.”