Eurozone manufacturing activity contracted at an unrevised rate according to the final PMI data for December. A final 47.8 print matched its flash reading, implying a sixth successive contraction albeit at a slower pace than in November (47.1).

Output was down for a seventh straight month but by the least since June as the ongoing slide in new business eased and was the shallowest in four months. Even so, with orders still falling faster than output, near-term production prospects remain grim. As it is, production was supported by a sharp drop in backlogs and the rate of job creation slowed to a 22-month low. Even so, business sentiment improved for a second successive month and firms were (marginally) optimistic about the outlook for the first time since August.

In part, this probably reflected reduced supply-chain problems helping to cap inflation pressures. The input cost rate fell to its lowest mark since November 2021, in turn paving the way for the output price rate to ease to its weakest level since March 2021.

In terms of national PMIs, France (48.3) saw the smallest decline in activity ahead of the Netherlands (48.6) and Italy (48.5). Austria (47.3) and Greece (47.2) were not far behind with Germany (47.1) and Spain (46.4) bringing up the rear. All the other member states also posted sub-50 readings.

Today's update would seem to confirm another miserable month for Eurozone manufacturing and probably means that the economy contracted slightly last quarter. Still, with both the region's ECDI and ECDI-P now at exactly zero, overall economic activity is at least matching market expectations.

No revisions are expected to the flash data.

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 3,000 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). Released by S&P Global, national data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These countries together account for an estimated 89 percent of Eurozone manufacturing activity.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index in the U.S. and the S&P Global PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The S&P Global PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.