Eurozone faces fastest employment cuts in four years amid crisis
According to the latest S&P study, the eurozone's private sector ended the year with a decline, marking the fastest pace of employment reduction in four years. Companies are reducing their workforce in response to decreased orders and economic activity, intensifying the crisis.
10:07 AM EST, December 16, 2024
The eurozone PMI, published on Monday by S&P, rose in December to 49.5 points from November's 48.3 points. However, it remained below the 50-point threshold that separates growth from decline. The service sector rebounded slightly, while industrial production experienced its deepest drop in a year.
The PMI reading indicates that economic activity in the private sector is declining for the second consecutive month. Due to the ongoing drop in new orders, companies are reducing production. In the manufacturing sector, the decline in activity was particularly pronounced, marking the twenty-first consecutive month of decreases.
Germany and France drag down the EU
The economic downturn in the eurozone primarily reflects the situation in the two largest economies: Germany and France. Both countries continue to experience a decline in economic activity, although the pace slightly weakened compared to the previous month. Other eurozone countries, however, recorded solid production growth, achieving the highest expansion rate in six months.
New export orders, including intra-eurozone trade, fell again at a faster rate than the total order book. "The decline in foreign orders was significant, though the weakest since August, as the rate of decline in both monitored sectors slowed compared to the previous month," the report reads.
The specter of inflation still haunts the EU. "The situation is quite gloomy"
In December, inflationary pressure markedly increased. This means production costs rose faster in four months, and the growth rate was close to the pre-pandemic average.
Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, recalled that at their December meeting, ECB representatives assured that they are closely monitoring inflation in the service sector, which remains significantly above overall inflation. The PMI indicators leave no illusions here. Costs are rising faster and faster, marking the third consecutive month of increases. Sales prices have followed suit, indicating that the rising inflation risk persists.
The expert highlights that the manufacturing sector continues to face significant challenges, with December seeing the sharpest production decline of the year and a further drop in incoming orders. The ongoing reduction in inventories shows no signs of abating. However, he also notes some reasons for optimism, citing global PMI data from November that suggested a stabilization in operating conditions, hinting that the eurozone's downward trend might not persist uninterrupted.
