The slowdown in euro area manufacturing eased in May as production neared stabilisation and the pace of orders decline slowed amid rising demand. work Consumer sentiment worsened, according to the final HCOB survey results released by S&P Global on Monday.
The manufacturing purchasing managers' index rose to 47.3 in May from 45.7 in April. The preliminary reading was 47.4.
While it was below the neutral level of 50.0, it was the highest since March 2023 and signaled the slowest deterioration in manufacturing in more than a year.
Production was roughly stable in May. Factory output fell at the slowest pace in over a year, while new orders fell at the slowest rate in two years.
Backlogs continued to fall, the lowest rate of decline since August 2022, as demand weakened and factories used open orders as a way to shore up production.
As spare capacity became apparent, employment fell further, extending the period of factory job losses to a year, though the rate of decline was still moderate and similar to that in April.
Purchasing activity continued to decline, but the pace of decline was the slowest since September 2022. This in part reflected ample input inventory levels, which led to a reduction in manufacturers' pre-production inventories.
On the price side, the PMI survey showed that input costs fell in May, extending the current series of declines that began in March 2023. Prices of goods leaving factories fell further.
Manufacturers' optimism about their production outlook over the next 12 months has improved, with positive sentiment levels hitting their highest since February 2022.
Most countries in the currency zone reported improvements, with contractions slowing in Germany and France.
At the same time, Spain experienced faster growth. In contrast, Italy's situation has worsened to its worst in five months.
The survey showed that German production and new orders fell much more slowly than in April. The HCOB manufacturing PMI final reading rose to 45.4 in May, the highest in four months, up from 42.5 in April and in line with the preliminary reading.
Although French manufacturers continue to suffer from a persistent weakness in new orders, the contraction in overall activity in May only slowed. The corresponding index came in at 46.4 in May, compared with 45.3 in April. The provisional reading was 46.7.
Italian manufacturers reported a sharp decline in orders, which in turn led to a drop in production. The HCOB manufacturing PMI fell to a five-month low of 45.6 in May from 47.3 in April.
Spain's manufacturing growth accelerated in May on the back of rising production and new orders, with the PMI improving to a 26-month high of 54.0 from 52.2 in April.
Renju Jaya
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