Eurozone Manufacturing Slips Back Into Contraction

The Eurozone’s manufacturing engine lost pace in November, with fresh demand weakness pulling the HCOB Eurozone Manufacturing PMI back below 50.

The index fell to 49.6, signalling a mild return to contraction after a short-lived stabilization in October. Soft domestic demand, falling new orders, and cautious sentiment across the bloc all contributed to the setback.

Output Grows at the Slowest Pace

Despite the broader cooling, factory output managed to expand for a ninth consecutive month, though November marked the weakest performance in the current recovery phase. Much of the support came from companies drawing down backlogs as new work volumes dipped once again. Export demand remained under strain, with overseas orders falling for a fifth straight month. Employment, purchasing activity and inventory levels also declined at faster rates, highlighting a shift toward more defensive strategies as uncertainty lingers.

Germany and France Drag, Southern Europe Holds Up Better

The November readings revealed a sharp divergence between the Eurozone’s two largest economies and the rest of the region. Germany and France posted their lowest PMI levels in nine months, sliding further into contraction. Political uncertainty in France and structural concerns in Germany continue to weigh on investment and industrial momentum.

In contrast, several other economies, notably Italy, Austria, Spain, Greece, and the Netherlands, reported modest expansions. Ireland led the group, posting the greatest improvement in four months.

Cost Pressures Return, but Firms Struggle to Raise Prices

Input costs rose at their fastest pace since March, reflecting renewed supply chain frictions and longer delivery times. Yet despite these pressures, manufacturers were unable to pass higher costs on to customers. Selling prices dropped for the sixth time in seven months, underscoring limited pricing power and intense competition within the sector.

Cautious Present, Brighter Outlook

While current production conditions remain fragile, expectations for the year ahead improved significantly. Business confidence climbed above its long-term average, supported by early signs of stabilization in parts of Southern Europe and a modest sentiment rebound in Germany and France. A full recovery in European manufacturing is still out of reach, but the rise in optimism suggests the groundwork for a gradual improvement may be forming as 2025 approaches.

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