European Manufacturing Rebound

The four largest Euro Area member economies released results indicating manufacturing expansion in December. All values printed above the 50 mark with Spain moderately decelerating to 53.0 in December from 53.1 in November. France also experienced a slight decline to 51.4 from November’s 51.6. These small declines were offset by gains for both Germany and Italy, resulting in 53.2 and 55.6 expansion respectively, surpassing the prior month’s values of 53.0 and 54.9. The aggregate Euro Area manufacturing PMI also improved, rising to 53.2 in December compared to the 53.1 reported in November as the ECB’s accommodation takes root in the economy. All values obtained signaled a solid year end of the sector for the year of 2015. While the Euro did not display any major momentum during the announcements, the common currency slumped near the close of European equities.

The Institute for Supply Management reported a manufacturing decline for the month of December, reporting the fastest pace of decline since June 2009. The ISM Manufacturing PMI contracted during December with the figure slipping to 48.2 compared to November’s 48.6, missing consensus estimates of 49.0. The decline was mainly attributed to the decline in new orders, production, employment and raw materials. Factories in particular cut staff at the end of 2015 due to the stagnant international trade conditions and a stronger US dollar. The dollar is expected to hold back exports for the remainder of 2016, leading to further declines in economic activity.  Already, the Atlanta Federal Reserve has indicated that fourth quarter growth will experience a substantial decline, with the model currently predicting meager 0.70% growth during the period, marking a substantial downward revision from earlier estimates.