Euro zone’s PMI finishes 2020 on high

LONDON: Manufacturers in the euro zone ended 2020 on a high, with activity in the sector increasing at its fastest pace since mid2018, suggesting the bloc’s economy was less hard hit by the pandemic than earlier in the year, a survey showed.

Germany was again the driving force and in contrast to the bloc’s dominant service industry — which has been particularly badly impacted by lockdown measures to tackle the coronavirus — factories in the region have mostly remained open.

IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) rose to 55.2 in December from November’s 53.8.

Anything above 50 indicates growth, and December was the highest reading since May 2018. An index measuring output, and which feeds into a composite PMI due on Wednesday that is seen as a good guide to economic health, rose to 56.3 from 55.3.

“The economy consequently looks set to be hit by the pandemic in the fourth quarter far less than the unprecedented decline in the second quarter thanks to the resilience of manufacturing,” said Chris Williamson, chief business economist at IHS Markit.

Although the euro zone economy likely contracted again last quarter as renewed lockdown measures stifled activity, a December Reuters poll suggested the bloc’s GDP will return to pre-crisis levels within two years.

German factories churned out more goods in December despite a stricter lockdown to head off a spike in coronavirus deaths in Europe’s largest economy.

IHS Markit’s final Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of the German economy, rose to 58.3 from 57.8 the previous month.

The December reading was slightly below a flash estimate released last month, but it still marked the highest reading since February 2018.

New orders i ncreased amid strong demand for German goods and in part reflecting a temporary spike in British demand prior to the end of the Brexit transition period.