The HCOB Eurozone Manufacturing PMI for May rose to 47.3, up from April's 45.7, marking a 14-month high, according to report realeased on Wednesday. Despite this improvement, the index remains below the critical 50.0 threshold, indicating continued contraction, though at the slowest rate in over a year. The PMI Output Index also climbed to 49.3 from April's 47.3, reflecting the third consecutive month of narrowing declines in factory production. Peripheral eurozone countries exhibited growth, with Greece leading at a PMI of 54.9, despite a four-month low. Spain and the Netherlands followed with PMIs of 54.0 and 52.5, respectively, hitting 26-month and 21-month highs. Conversely, Germany and France, the two largest economies in the eurozone, showed slower contraction rates, with Germany at 45.4 and France at 46.4. New orders saw a marginal overall decline, with the rate of contraction being the weakest in two years. Export sales dropped to their lowest level since May 2022, and the backlog of work continued to decrease, extending the current period of factory job losses to a year. Employment rates saw a modest improvement, with slower job cuts compared to April. Input costs fell again, continuing a trend since March 2023, while the price of goods leaving factories also decreased, marking a fourth consecutive month of reduction. Purchasing activity shrank further, reflecting depleted input stock levels and improved lead times for raw materials. Despite the ongoing challenges, eurozone goods producers expressed strong optimism for the next 12 months, with sentiment levels at their highest since February 2022. This cautious optimism suggests a potential stabilisation in the near future, though significant hurdles remain.
