The worst times for eurozone factories are over, according to December PMI

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Falling manufacturing activity in the eurozone is likely to pass its lowest point as supply chains begin to recover and inflationary pressures ease, a survey showed on Monday, leading to a rebound in optimism among factory managers.

S&P Global’s final purchasing managers’ reading (PMI) for manufacturing stood at 47.8 points in December, up from 47.1 in November, matching the preliminary reading, but still below the 50 mark that separates growth from contraction.

The output index, which feeds the composite PMI to be released on Wednesday and is considered a good guide to economic health, also stood at 47.8, up from Nov. 46.0, marking its seventh month of readings below 50 but the highest since June.

Final data was collected last month earlier than usual due to the holiday season.

“The second consecutive monthly slowdown in the pace of contraction in industrial production brings some joy to the beleaguered manufacturing sector as we head into the new year,” said Chris Williamson, chief economist at S&P Global.

“The outlook has improved amid signs of improvements in supply chains and a marked decline in inflationary pressures, as well as a reduction in concern about the region’s energy crisis, thanks in part to help from governments.”

Although input and output price sub-indices remained high, both fell substantially, which is likely to be good news for European Central Bank monetary leaders, who have been trying to calm runaway inflation by tightening monetary policy.

With inflationary pressures easing, supply chains recovering and the possibility of an energy crisis being avoided, purchasing managers were optimistic and the future output index rose from 48.8 to 53.8 points.

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“The percentage of optimists about production in the twelve-month period has also outpaced that of pessimists for the first time since last August, suggesting a steady improvement in business confidence,” Williamson said.

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