BENGALURU/SINGAPORE, Jan 2 (Reuters): Euro zone manufacturing activity shrank further in December but Asia's factory powerhouses closed 2025 on a firmer footing backed by a rebound in export orders and growing demand for artificial intelligence, private surveys showed.
Factory activity in the common currency bloc slid into deeper contraction last month as production decreased for the first time in 10 months on further declines in new orders.
The HCOB Eurozone Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 48.8 in December from 49.6 in November. It was the lowest reading in nine months and below the 50 level that separates growth from contraction for the second straight month.
Surveys highlighted a broad-based decline in activity in the 20-nation euro zone.
Germany, the bloc's largest economy, recorded the weakest performance among the eight nations monitored with the PMI reading hitting a 10-month low. Italy and Spain also slipped back into contraction territory.
"Demand for manufactured products from the euro zone is slowing down again," said 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."
France provided a rare bright spot, with its manufacturing PMI jumping to a 42-month high.
In Britain, outside the European Union, activity grew at its fastest pace in 15 months in December, riding a recovery in demand after finance minister Rachel Reeves' budget provided some relief.
Asia shines
Factory activity in the major tech-exporting economies of South Korea and Taiwan snapped months of declines in December, while most Southeast Asian nations maintained brisk growth.
They followed PMIs released for China on Tuesday, which also showed an unexpected turnaround in factory activity in the world's second-largest economy, helped by a pre-holiday surge in orders.
While it is too early to say whether Asia's largest exporters are adjusting to US tariffs, a pickup in global demand had given some manufacturers cause for optimism heading into the new year.
"Exports from most countries have surged in recent months, and we think the near-term outlook for Asia's export-oriented manufacturing sectors remains favourable," said Shivaan Tandon, Asia economist with Capital Economics.
He noted that most Asian economies should continue to benefit from a shift in US demand away from China and strong global demand for AI-related hardware.
Taiwan's PMI rose to 50.9 in December from 48.8 in November, breaking above the 50-point mark that separates growth from contraction for the first time in 10 months.
Similarly, South Korea's PMI rose to 50.1 from 49.4, the first expansionary reading since September on the steepest rise in new orders since November 2024.
Both economies are among the world's largest manufacturers of semiconductors, which have benefited enormously from a booming market for artificial intelligence.
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