Eurozone manufacturing PMI revised higher but downturn continues

The downturn in the eurozone's manufacturing sector wasn't as bad as initially feared in June, with initial estimates being revised higher on Monday, though the contraction across the region remained firmly entrenched.

According to the monthly manufacturing survey by S&P Global and the Hamburg Commercial Bank (HCOB), the purchasing managers' index (PMI) was pushed up to 45.8 last month, up 0.3 points from the first reading of 45.6 released two weeks ago.

Notably, manufacturing PMIs from Germany, France and Italy were all revised slightly higher for the month.

Nevertheless, the overall reading for the single-currency region was still down from the 14-month high of 47.3 in May and well below the 50-point level which separates contraction from expansion. The long-term survey average stands at 51.6.

Factory production across the euro area declined at the fastest pace in 2024 so far, with the output PMI sinking to 46.1 from 49.3 on the back of a sharper deterioration in demand conditions, with the sub-index for new orders also falling further below the 50-point mark.

Meanwhile, manufacturers lowered purchasing quantities in June amid shrinking production requirements, HCOB said, while stocks of purchases continued to be depleted.

“Is this another bull trap for the manufacturing sector, similar to the false start at the beginning of 2023 when output briefly improved only to fall back again for a longer period? Indeed, the PMI indices for all Eurozone countries, except Italy, deteriorated in June," said HCOB's chief economist Cyrus de la Rubia.

"However, we are inclined to see this more as a temporary blip rather than a sign of a prolonged downturn. Manufacturing growth was seen in other parts of the world in June, such as the United States, UK, and India, according to their respective Flash PMI. This global recovery provides a supportive backdrop for Eurozone manufacturers. Additionally, optimism about future production remains as high as it was in May, indicating that businesses are still confident about the coming year."