Manufacturing within the Eurozone will finish at a excessive degree in 2020 as German factories buzz PMIs

LONDON (Reuters) – Manufacturers in the Eurozone ended 2020 on a high. Activity in this sector grew the fastest since mid-2018, suggesting that the bloc's economy was less affected by the pandemic than it was shown earlier in the year.

Germany was again the driving force, and unlike the bloc's dominant service industry, which has been particularly hard hit by lockdown measures to combat the coronavirus, factories in the region have largely remained open.

IHS Markit's final purchasing managers' index (PMI) for manufacturing rose to 55.2 in December from 53.8 in November, despite being below the original 55.5 "Flash" estimate.

Anything over 50 indicates growth, and December was its highest since May 2018. An index that measures production and feeds into a compound PMI due Wednesday, considered a good guide to economic health, rose from 55 .3 to 56.3.

"As a result, the economy is likely 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 economist at IHS Markit.

Although the eurozone economy likely contracted again in the final quarter as renewed lockdowns suppressed activity, a Reuters poll in December indicated that the bloc's GDP will return to pre-crisis levels within two years. (ECILT / EU)

Incoming orders rose due to strong demand for German goods and partly due to a temporary surge in UK demand prior to the end of the Brexit transition period.

But despite strong demand and the factories that have built an order backlog in one of the sharpest steps in almost three years, the number of employees was reduced again last month, albeit more slowly. The employment index rose from 48.7 to 49.2.

"Employment has continued to fall, but this is following a pattern similar to the recovery from the global financial crisis, with the improvement in the labor market occurring later than the increase in output," said Williamson.

"Provided that output growth can be sustained, jobs should soon follow suit."

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