Despite persistent challenges, the eurozone’s manufacturing sector displayed resilience at the beginning of the second quarter as factory production shrank at the softest rate in a year while business confidence improved further. The latest S&P Global HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI) remained below 50 for the 22nd consecutive month in April, posting 45.7, down from 46.1 in March. The figure marked a slightly faster rate of deterioration in euro area manufacturing business conditions.
The PMI data provided some positive developments. However, the sharpest decline in new orders in the year-to-date highlighted the ongoing challenges the eurozone is still facing.
Regional variations
Country-level trends varied considerably during April, where the manufacturing sector in the southern parts of the eurozone continued to perform the strongest. Greece, Spain and the Netherlands all registered growth. In April, the Netherlands saw manufacturing conditions improve for the first time since August 2022. However, declines in Germany and Austria offset the three nations’ growth.
Moderate declines in production and employment
April’s eurozone manufacturing data indicated a decline in manufacturing production. However, the rate of decline eased for a second consecutive month to the slowest in a year. The region saw a slight decline in output despite overall factory orders decreasing at a strong pace. In addition, the eurozone saw a decline in export markets as new foreign orders continued their downward trend.
Meanwhile, job losses in the eurozone’s manufacturing sector continued to increase, extending the current period of falling employment that started in June 2023. Nevertheless, the rate of decline was modest overall, recording the softest level in seven months.
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New orders and input costs
The eurozone’s manufacturing sector made efforts to mitigate the adverse impact of lower new orders by reducing backlogs of work and adjusting purchasing activity. Despite ongoing challenges, sentiment towards future production strengthened in April, reflecting cautious optimism among manufacturers.
Input costs continued to fall in April, albeit at a slower pace, while prices of goods declined for the twelfth consecutive month. This trend indicates efforts by firms to boost competitiveness amidst challenging market conditions.
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