Euro zone manufacturing's long slump may have reached a turning point last month, a survey showed, with new orders falling at the slowest rate in two years and business confidence improving.
The final HCOB euro zone manufacturing Purchasing Managers' Index (PMI) compiled by S&P Global rose to 47.3 in May from 45.7 in April, remaining below the 50 mark, which indicates growth in activity, for the 23rd consecutive month. It was slightly below the preliminary forecast of 47.4.
The index measuring production, which feeds into Wednesday's composite PMI and is seen as a good gauge of the economy's health, rose to 49.3, the highest level in 14 months, from 47.3 in April, although it was below the flash reading of 49.6.
“This could be a turning point for manufacturing, as the industry tries to end the decline in production that has continued since April 2023,” said Cyrus de la Rubia, chief economist at Hamburg Merkbank.
“Encouragingly, business confidence regarding future production is at its highest level since early 2022.”
At least some of the improvement is likely due to the new orders index, a measure of demand, rising to a two-year high of 47.3 from 44.1.
Falling production costs could allow factories to cut selling prices again, giving the European Central Bank room to cut interest rates on Thursday, a move that was widely expected as inflation eases.
