Euro zone manufacturing activity accelerated in January and approached the growth limit. It is noteworthy that manufacturing production in January increased for the tenth time in the last eleven months. However, the mood was dampened slightly by a decline in new factory orders since December. Overall, the pace of job losses also accelerated, but at least business confidence reached its highest level since February 2022, while pricing power among manufacturers in the sector appeared limited. HCOB notes that:
“Some progress may be seen in the manufacturing sector, but it is happening at a snail’s pace. After a decline in December, output rose slightly at the beginning of the year, essentially continuing the growth path we saw between spring and fall last year. However, order intakes did not help much – they fell again, albeit not as sharply as at the end of last year. Right now, it is difficult to say what could end the ongoing decline of inventories, which creates a strong A short-term bounce is unlikely, yet, when looking twelve months ahead, companies are feeling somewhat more enthusiastic than last month about expanding their production.
“There are some encouraging signs from Greece, France and Germany. In Greece, manufacturing sector growth has picked up significantly. In France, expansion has also accelerated, and in Germany, December’s sharp slowdown has given way to only a mild decline. In contrast, Italy paints a less optimistic picture, where industry is stuck in contraction territory. Next door in Austria, conditions have worsened significantly compared to last month. Spain, which has been among the eurozone’s four largest economies for most of the past two years Its manufacturing industry has been in decline for two consecutive months. Overall, this highly uneven picture does not set the stage for a sustained rebound.
“A significant increase in cost inflation is evident. The sharp rise in natural gas prices in January and, to a lesser extent, higher oil prices have likely played a role here. The rise in energy costs may prove to be temporary, as it is largely linked to the unusually cold winter in Europe and the US. Also, a range of industrial metals became more expensive in January compared to the previous month, which in itself is not a bad sign, as it may point to stronger global industrial demand. But on metals For companies dependent on copper, aluminum, or nickel, this puts pressure on profit margins. In fact, their prices appear to be largely stagnant.
