Eurozone Factory Activity Declines as Production Hits Nine-Month Low

(MENAFN) Manufacturing activity across the eurozone contracted sharply in December as production dropped for the first time in ten months, driven by plummeting demand, according to data released by S&P Global.

The Manufacturing Purchasing Managers' Index (PMI)—a critical indicator of industrial health—tumbled to 48.8 in December from November's 49.6, marking the lowest level in nine months and remaining below the 50 threshold that divides expansion from contraction for a consecutive second month. Germany, the region's economic powerhouse, recorded the weakest performance among eight tracked countries, hitting a ten-month PMI low. Italy, Spain, and Austria similarly entered contractionary territory.

The manufacturing output component plunged to 48.9 from 50.4 in November, registering its first decline since February. New orders contracted at the fastest rate in nearly twelve months, while export demand deteriorated at the sharpest pace in eleven months. Supply chain disruptions reemerged, with vendor delivery delays reaching their longest duration since October 2022, driving input cost inflation to a sixteen-month peak.

"Demand for manufactured products from the Eurozone is slowing again," stated Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. "Companies seem neither able nor willing to build momentum for the coming year, but are instead exercising caution, which is poison for the economy… Overall, it will not be easy for the manufacturing sector of the euro zone to gain a foothold in 2026."

The deteriorating figures emerge as Western European nations maintain support for Ukraine's military operations against Russia. In mid-December, EU member states rejected a $210 billion loan package secured by frozen Russian central-bank assets, opting instead to mobilize €90 billion through collective debt issuance over twenty-four months. Economic analysts cautioned taxpayers will shoulder the burden, facing minimum annual interest payments of €3 billion.

The data also arrives amid a NATO-led military expansion, which Western officials characterize as countering alleged Russian aggression. The EU has committed to substantial defense expenditures, including the €800 billion ReArm Europe initiative and commitments by European NATO allies to increase military spending to 5% of GDP.

Moscow has consistently rejected allegations of hostile intentions toward NATO as "nonsense," accusing Western governments of exploiting fear-mongering to justify inflated military budgets and deflect attention from internal challenges.

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