Markit's Eurozone Manufacturing Purchasing Managers Index (PMI) posted 50.5 points in January, down from December’s 51.4 points and remaining unchanged compared to the earlier flash estimate.
Ongoing weakness was apparent in the intermediate goods sector at the start of 2019, whilst producers of investment goods recorded a deterioration in operating conditions for the first time since July 2013. In contrast, the consumer goods category continued to enjoy solid growth in January.
In the same month, business confidence strengthened on December’s six-year low, but remained well below the series trend. Worries with regard to international trade and political developments within Europe continued to be reported by panellists.
“The January PMI adds to the likelihood that the manufacturing sector is in recession and will act as a drag on the economy in the first quarter,” stated Chris Williamson, chief economist at Markit. ““Worryingly, weaker-than-anticipated sales mean warehouses are filling up with unsold stock at a rate not previously recorded over the two decades of prior survey history, suggesting firms will need to cut operating capacity in coming months unless demand revives, boding ill for future production growth,” he added. Furthermore, “Jobs growth is starting to deteriorate as increasing numbers of firms seek to cut costs and raise productivity. Any such downturn in the labour market will in turn potentially drive consumer sentiment lower, and adds further to the risk that economic growth will continue to slow in coming months,” said Williamson.