By Daniel Hunter

The Eurozone manufacturing sector ended the year on a weak footing, with levels of production and new orders both contracting further in December. Rates of decline accelerated slightly over the month and were stronger than the earlier flash estimates.

At 46.1 in December, down from 46.2 in November, the seasonally adjusted Markit Final Eurozone Manufacturing PMI signalled contraction for the seventeenth straight month. The PMI was also below its earlier flash estimate of 46.3.

Ireland was the only nation to report improved operating conditions. Downturns accelerated in Germany, Spain, Austria and Greece, but eased in France, Italy and the Netherlands. Greece remained bottom of the PMI league table, still well adrift of the next-weakest performing nations France and Spain.

Eurozone manufacturing production declined for the tenth successive month in December, as companies were hit by reduced inflows of both total new orders and incoming new export business.

However, over Q4 2012 as a whole, the average rates of decline in both output and new orders were the slowest since the opening quarter of the year.

The latest decline in new export orders took the current sequence of contraction to one-and-a-half years, despite the rate of reduction easing slightly to a nine-month low. Lower levels of new export business reflected reduced trade flows between Eurozone nations and subdued demand in the wider global market.

“The eurozone manufacturing sector remained entrenched in a steep downturn at the end of the year," Chris Williamson, Chief Economist at Markit said.

"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.”

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