Germany Leads European Manufacturing to Best Month Since 2018

Euro-area manufacturing grew at the fastest pace in more than 2 1/2 years in December, bringing some positive news at the end of an horrific 2020 for the region’s economy.

Final readings of IHS Markit’s monthly surveys showed growth led by Germany, where activity expanded the most in almost three years, with all other countries covered also reporting an improvement on November. The euro-area index came in at 55.2, up from 53.8 though slightly lower than an earlier preliminary reading.

The improvement comes as governments continue to grapple with the coronavirus. The latest restrictions to contain the spread have been mostly confined to services such as bars and restaurants, allowing manufacturing to continue. That’s limiting the downside to the economy compared with the huge slump seen during the initial phase of the pandemic.

“Euro-zone manufacturing ended 2020 on an encouragingly strong note,” said Chris Williamson, an economist at IHS Markit. “Rising virus case numbers are nevertheless likely to mean trading conditions remain challenging in the near-term and therefore constrain growth.”

Some of the improvement at factories in December, particularly in Ireland and the Netherlands, reflected a temporary boost in demand from U.K. customers stockpiling before the end-of-year Brexit date.

The results may not fully capture disruptions in late December. France temporarily closed cross-Channel traffic from the U.K. after a new, more infectious strain of the coronavirus was discovered.

In Asia, manufacturing Purchasing Managers’ Indexes saw improvements in some countries, though China’smomentum moderated. Its official manufacturing gauge fell in December from a three-year high. The Caixin Media and IHS Markit PMI dropped to 53 from 54.9.

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