Eurozone manufacturing ended 2012 mired in recession according to the most recent data on the sector published this morning by Markit. The final manufacturing PMI (Purchasing Managers' Index) for December for the region was revised down to 46.1 from the 46.3 flash estimate.

The downturn remains widespread as all of the member nations except Ireland (51.4) reported contractions. Markit noted that cost caution led to job losses along with a further scaling back of inventory holdings.

Markit chief economist Chris Williamson warned that the recession appears to have deepened significantly in the region and that he did not expect pressure to ease this year:

"The Eurozone manufacturing sector remained entrenched in a steep downturn at the end of the year. Although not as severe as in the autumn, the survey indicates that production continued to fall at a quarterly rate of approximately 1% in December, therefore acting as a severe drag on the wider economy. The region's recession therefore looks likely to have deepened, possibly quite significantly, in the final quarter.

"Manufacturers look to be in for another tough year in 2013, though prospects have brightened a little, as producers should benefit from signs of stronger demand in key export markets such as the US and China. Improving competitiveness remains the key to success, however, and Ireland perhaps provides a reassuring example to other countries of how exports can rise on the back of structural reforms.

"Much of course also depends on how the region's debt crisis evolves over coming months, and any set-backs could mean the resulting damage to domestic business and consumer confidence could easily offset any gains made in export markets outside of the Eurozone."

JM

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