Financial News: Eurozone Manufacturing Downturn Eases

Eurozone Manufacturing Downturn Eases

(RTTNews) - Downturn in the euro area manufacturing slowed in March as output expanded for the first time in two years, signaling a recovery in the sector, final results of the latest purchasing managers' survey by S&P Global showed on Tuesday.

The HCOB manufacturing Purchasing Managers' Index rose to 48.6 in March from 47.6 in the previous month. The flash score was 48.7.

The index signaled a decline that was only moderate and the softest since January 2023.

"Things are looking up," Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

The PMI increased for the third consecutive month and the output index even surpassed the threshold for growth, the economist noted.

De la Rubia said a significant part of this improvement may have to do with the frontloading of orders from the U.S. ahead of the tariffs, which means some backlash is to be expected in the coming months.

The overall expansion in output was the first in two years and the most marked since May 2022. Production grew despite further fall in incoming new business. Export markets remained a drag on overall sales.

The level of backlogged work decreased as output growth came in tandem with lower new business intakes. Nonetheless, the fall in outstanding orders was the least pronounced since July 2022.

Factories made further reductions to their workforce numbers amid signs of excess capacity. The rate of job shedding cooled from February's four-and-a-half year record.

Manufacturers reduced their quantities of purchases, albeit to an extent that was the least marked in just over two-and-a-half years. Pre-production inventories shrank at a slightly faster rate.

Stocks of finished goods also reduced. Meanwhile, surveyed factories in the euro area reported speedier supplier delivery times.

Regarding prices, the PMI survey showed that input prices continued to rise and logged the fastest increase in seven months. Prices charged for goods rose marginally amid an intensification of cost pressures. Manufacturers foresee greater production volumes with growth expectations slightly above the series average. However, the level of optimism slid to a three-month low.

The currency union's big-two economies, namely Germany and France, logged manufacturing PMI figures that were the highest for 31 and 26 months, respectively.

Germany's manufacturing activity shrank at a slower pace in March as production increased for the first time in nearly two years driven by new orders. The factory PMI climbed to 48.3, in line with the flash estimate, from 46.5 in February. This was the highest score since August 2022.

The French manufacturing activity showed signs of stabilization in March. The HCOB final factory PMI rose to 48.5 from 45.8 in the previous month. The flash score was 48.9.

Meanwhile, the Italian manufacturing sector remained stuck in a downturn in March. The index fell to 46.6 from 47.4 in February. Declines in production and new orders kept firms in retrenchment mode.

Similarly, Spain's manufacturing economy worsened in March for a second straight month in March. The HCOB factory PMI slid to 49.5 from 49.7 in the previous month.

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