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PATRIS - Macro - December Markit Manufacturing PMI declines in Spain, while it remains in contraction territory in Italy

2 Jan 2019

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Bottom-Line: There was no change in the final reading of December’s manufacturing PMI for the Eurozone. Therefore, the index fell by 0.4 points to 51.4 in December, the lowest level since February 2016. 4Q18 average stood at 51.7 (vs. 54.3 in 3Q18), which is the lowest reading since 1Q16. As also suggested by the latest Caixin and NBS manufacturing PMIs for China, industrial production is likely to remain subdued over the coming months.  

Germany, France, Spain and Italy posted the lowest readings for all countries monitored by Markit in the Euro Area. Only the Netherlands recorded a rise in the manufacturing PMI in December.

The details of the survey for the Euro Area showed further weakness in new orders. This sub-index was in contraction territory for the third successive month. Input cost inflation eased significantly, to its lowest level in 17 months, with reports of reduced prices for oil-based products. The output prices sub-index fell to the lowest level since July 2017.

Details:

Spain: Markit manufacturing PMI fell by 1.5 points in December to 51.1 (vs. consensus 52.4). This is the lowest reading since August 2016. The 4Q18 average stood at 51.8 (vs. 52.4 in 3Q18), the lowest quarterly print since 3Q16.

The details of the survey showed weaker gains in both output and new work (both to around two-and-a-half years lows). 12-month ahead confidence reached a three-month high. There was a significant slowdown in input price inflation (to the lowest level since September 2016), reflecting the fall in global crude oil prices. Latest data indicated near stagnation of average output tariffs. There were reports from the survey panel that economic instability and ongoing weakness in the autos sector was weighing on growth. Demand from north and central America was reported to have supported new export order wins during the latest survey period. Staffing levels continued to increase, albeit at a slower rate that was amongst the slowest recorded by the survey in the past five years.

Italy: Markit/ADACI manufacturing PMI rose by 0.6 points to 49.2 in December (vs. consensus 48.4). Despite the rise posted by the index in December, this was the third month in a row below 50. The 4Q18 average reached 49.0 (vs. 50.5 in 3Q18), the lowest quarterly reading since 4Q14.

Output and new orders continued in contraction territory. New orders decreased for the fifth successive month in December. The employment sub-index fell to a four-year low (and the rise in employment was marginal), reflecting the recent signs of demand weakness. 12-month ahead business confidence hit the lowest level in six years. On the price front, input cost inflation eased to the slowest since September 2016, while the output charges sub-index reached the lowest level in almost a year-and-half.

Other countries: The manufacturing PMI fell in Greece (-0.2 points to 53.8), Ireland (-0.9 points to 54.5) and Austria (-1 point to 53.9). The index increased by 1.1 points to 57.2 in the Netherlands (vs. consensus 55.6). There was no change compared to the flash reading for the index in Germany, which means that the index declined by 0.3 points in December. There was also no change in France. The index fell by 1.1 points to 49.7.

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