Manufacturing PMI readings improved in most countries surveyed. Contractions slowed in Germany and France, the single currency zone's two largest economies, but Germany still had the euro zone's worst manufacturing sector, while expansion accelerated in Spain and the Netherlands, both of which recorded their biggest improvement in factory activity since 2022. Greece maintained its top position despite growth falling to its lowest level in four months.
Production across the euro area was broadly stable in May. Factory output fell, but the decline was the smallest in over a year and modest overall. Surveyed companies reported a decline in new orders in the middle of the second quarter, which continued to hamper production lines. However, the rate of decline was the weakest in two years. New export sales also fell, with the rate of decline also slowing to the lowest since May 2022, according to S&P Global.
The Eurozone manufacturing PMI rose to 47.3 in May 2024, the highest level since March 2023, indicating the slowest sector deterioration in more than a year. The recession slowed in Germany and France and improved in Spain and the Netherlands. Production stabilised, declines in new orders and export sales slowed and employment fell modestly.
Weak demand led eurozone factories to use outstanding orders as a means to support production, leading to a continued decline in the work backlog in May. However, while the rate of decline was notable, it was the lowest since August 2022. Overall eurozone manufacturing employment fell further amid signs of spare capacity, extending factory job losses to one year. The rate of decline was the same as in April, and more moderate.
Purchasing activity continued to contract through the middle of the second quarter, but the pace of decline was the slowest since September 2022. This partly reflects ample input inventory levels, with the latest survey data showing that pre-production stocks at euro area manufacturers have fallen for the 16th consecutive month. When it comes to deliveries of raw materials and other items needed for production, surveyors reported further improvement in lead times.
Input costs fell again, extending the current series of declines that began in March 2023. However, the decline was only modest and the slowest in a period. Prices of goods leaving factories across the euro area fell further month-on-month.
Looking ahead, euro area goods producers expressed strong optimism about their production prospects over the next 12 months, with the level of optimism exceeding the historical average and reaching its highest level since February 2022.
Fibre2Fashion News Desk (DP)
