LONDON (Reuters) – The long-standing slowdown in the euro zone’s manufacturing sector could be at a turning point, a survey showed on Monday, which showed new orders falling at their slowest pace in two years, which This is reflected in an improvement in business confidence.
The final HCOB PMI for the sector published by S&P Gobal came in at 47.3 in May, compared to an initial estimate of 47.4 and a reading of 45.7 in April. This is the 23rd consecutive month that it has been below the 50 mark separating contraction and growth in activity.
The subindex measuring production, which feeds into the composite PMI due Wednesday and is considered a good indicator of economic health, however, jumped from 47.3 in April to 49.3 in May, its highest over 14 months. It is nevertheless below the “flash” estimate of 49.6.
“This could be a turning point for the manufacturing sector. The industry is on the verge of ending the decline in production that has persisted since April 2023,” notes Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
“It is encouraging to see that business confidence regarding future production is at its highest level since the start of 2022,” he adds.
Part of this improvement is likely linked to the new orders index, a measure of demand. It rebounded to a two-year high, going from 44.1 to 47.3.
The fall in production costs has once again allowed factories to reduce their invoice prices, which could give the European Central Bank (ECB), which meets on Thursday, more room to reduce its rates.
(Written by Jonathan Cable; French version Claude Chendjou, edited by Blandine Hénault)
Copyright © 2024 Thomson Reuters