Eurozone Manufacturing Downturn Eases In May

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The downturn in the euro area manufacturing sector eased noticeably in May as companies restarted work after coronavirus lockdown eased, final data from IHS Markit showed Monday.

The manufacturing Purchasing Managers’ Index improved to 39.4 in May from April’s record low of 33.4. The flash reading was 39.5.

A score below 50 suggests contraction. Government restrictions designed to limit the spread of the global coronavirus, or Covid-19, continued to severely hamper the sector.

“While we are still set to see unprecedented falls in industrial production and GDP in the second quarter, the survey brings hope that the goods-producing sector may at least see some stabilisation – and even potentially a return to growth – in the third quarter,” Chris Williamson, chief business economist at IHS Markit, said.

After record contractions in April, production and new orders placed with euro area manufacturers declined at noticeably slower rates in May. Exports logged its second-sharpest fall in the survey history.

Manufacturers continued to sharply reduce their staffing levels in May, extending the current period of contraction to 13 successive months.

On the price front, deflationary pressures continued to build. The survey showed that input costs fell for a twelfth consecutive month in May. With the demand environment challenging, firms chose to cut their output charges.

Finally, confidence about the year ahead improved to a three-month high in May but remained inside negative territory.

Although there was a general improvement in PMI readings across the region, all countries continued to experience further deterioration in operating conditions.

Germany recorded the lowest PMI of all countries, followed by Spain. Germany’s headline IHS Markit/BME manufacturing PMI climbed to 36.6 from April’s 11-year low of 34.5. This was below the flash reading of 36.8.

The slower falls in output and new orders were partly offset by a steeper decline in employment, a renewed drop in stocks of purchases and a less marked lengthening of supplier delivery times.

France’s final manufacturing PMI rose to 40.6 in May from 31.5 in April. Although the indicator showed another marked contraction, the score was slightly above the flash 40.3.

Data showed that French output, new orders and employment all fell at slower rates in May after April’s survey record.

Spain’s factory PMI advanced to 38.3 from 30.8 a month ago. The score was forecast to rise to 38.0. At the same time, Italy’s PMI came in at 45.4, up from 31.1 in April and above the forecast of 37.1.

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