By Jonathan Cable
(Reuters) -Manufacturing activity fell sharply across Europe last month and a further decline in demand dashed hopes for an imminent turnaround, whereas in China factories extended their recovery and U.S. producers saw new order growth for the first time in eight months, surveys showed.
China's upswing was driven in part by Beijing's stimulus measures and a rush to export ahead of proposed tariffs by U.S. President-elect Donald Trump who returns to the White House in January.
Trump's tariffs would also have a significant impact on an already struggling euro zone economy, a Reuters poll found last month.
HCOB's final euro zone manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, sank to 45.2 in November, data showed on Monday, matching a preliminary estimate and further below the 50 mark separating growth from contraction.
In October it was 46.0 and the headline reading has been sub-50 since mid-2022.
Manufacturing activity in Germany, Europe's largest economy, remained firmly entrenched in contractionary territory while France saw the steepest decline in new orders since the first wave of the COVID-19 pandemic in 2020.
In Britain, outside the European Union, its PMI pointed to the sharpest contraction in nine months, as orders from domestic and foreign customers fell.
S&P cited headwinds from a 25 billion pound ($32 billion) rise in employment taxes in the new Labour government's Oct. 30 budget, a 7% increase in Britain's minimum wage, disruption to shipping in the Red Sea and the threat of global goods tariffs.
"The UK follows the weaker results also shown in the European PMI data, and shows that across both the UK and euro zone, manufacturers are really feeling the downturn," said Cara Haffey at PwC.
"In particular, smaller manufacturers are seeing a decline in order book and production volumes."
In the U.S., the Institute for Supply Management's manufacturing index climbed to the highest level in five months on an upswing in new orders, although the index reading of 48.4 showed activity overall remained slightly in contraction territory. Comments from manufacturers were mostly downbeat, though some economists expect to see a modest run of improvement in goods producer sentiment in the next few months, mirroring what occurred after Trump's first election victory in 2016.
"I would not be surprised to see a similar dynamic this time, though in the current case, the underlying fundamentals for the factory sector have been tepid at best for a while," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.