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Steel mill in Germany

Euro-Zone Factories End 2019 in a Funk as Orders, Jobs Fade

Jan. 2, 2020
The reports will come as a disappointment after optimism that the economy might get a lift from an easing of tensions that have heightened uncertainty and damped investment.

Europe’s manufacturing downturn deepened in December despite an easing of tensions over Brexit and international trade, damping hopes that the continent’s downturn has bottomed out.

In the euro zone, IHS Markit’s gauge of factory activity deteriorated and posted an 11th consecutive month below 50, signaling contraction. U.K. manufacturing output matched its sharpest downturn in more than seven years and orders for new work from domestic and overseas clients plunged.

The reports will come as a disappointment after optimism that the economy might get a lift from an easing of tensions that have heightened uncertainty and damped investment. The British survey included the days immediately following Boris Johnson’s decisive election win on Dec. 12, which will allow him to pass his withdrawal agreement for leaving the European Union. The euro zone has just received a fresh wave of and European Central Bank monetary stimulus.

Internationally, U.S. President Donald Trump said he’ll sign the first phase of a trade deal with China on Jan. 15, though the date has yet to be confirmed by the Chinese side.

The euro and pound both weakened against the dollar after the reports

Euro-zone orders fell in December, with the rate of job losses the sharpest since the start of 2013, the data showed. Germany was again the weakest-performing country, and the contractions in the Netherlands and Italy were the steepest in more than six and a half years. France saw a slight increase in activity.

Producers of intermediate and investment goods suffered most, while growth in consumer goods -- albeit marginal -- was reported for the first time since August.

“The ability of the wider economy to avoid sliding into a downturn in the face of such a steep manufacturing contraction remains a key challenge for the euro zone as we head into 2020,” said Chris Williamson, chief business economist at IHS Markit.

Europe isn’t the only economy suffering. Export-reliant Singapore closed out 2019 with a slump in growth, as trade-reliant sectors struggled to gain traction.

Elsewhere in Asia though, manufacturing finished the year with a modestly brighter outlook, with fewer economies signaling contraction at factories. Purchasing manager indexes for South Korea, Thailand and Taiwan all moved above 50 in December. Malaysia was on the dividing line, while Indonesia stayed slightly below it.

China’s manufacturing sector expanded, aided by the prospect of an agreement preventing further tariff increases on goods shipped to the U.S.

In addition, the nation’s central bank kicked off 2020 by greasing the wheels. The People’s Bank of China trimmed the amount of cash that lenders must hold in reserve and signaled continued action in 2020 to reduce borrowing costs for companies.

By Paul Gordon and Catherine Bosley

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