The recovery in the eurozone manufacturing sector registered a modest slowdown in May. At 52.2, down from 53.4 in April, the final seasonally adjusted Markit Eurozone Manufacturing PMI® posted its lowest reading in six months and came in below the earlier flash estimate (52.5), but remained at a level consistent with a solid improvement in operating conditions.
The easing signalled by the headline PMI reflected slower rates of expansion in production, new orders and employment. Companies also reported a sharper cut in inventories of purchased goods. Almost all of the nations covered saw their PMI remain above the 50.0 no-change mark, but only the Netherlands and Spain reported faster rates of growth. France, in contrast, fell back into contraction after expanding in the prior two months.
Eurozone manufacturing output and new orders both expanded for the eleventh successive month in May, despite growth easing to the lowest since last November in both cases. Only the Netherlands reported a faster expansion of output, while none of the nations for which May data were available saw improved new order growth. The slower rate of increase in new business meant that backlogs of work fell for the first time since last September.
France was the weakest performer overall, being the only nation to report a decline in new business and a near-stagnant rate of increase in production. France was hit by weaker inflows of both domestic and new export orders, despite firms’ attempts to shore up demand through discounted prices.
Lower selling prices were also reported in Austria and Greece. However, these were offset by higher output charges in Germany, Italy, Spain and the Netherlands, meaning that eurozone manufacturing selling prices increased (on average) for the first time in three months.
The rate of decline in input prices also eased during the latest survey period. Although costs fell for the fourth straight month, the decrease was the least marked since February. Italy, Spain and Greece all reported higher input prices, while rates of decrease slowed in Germany, France, the Netherlands and Austria.
The level of new export orders at eurozone manufacturers increased for the eleventh successive month, with gains reported by all nations bar France. Companies reported stronger demand from the US, Asia and other European markets. However, the rate of increase in new export business was the lowest since last July.
Employment rose for the fifth successive month in May. Job creation was signalled by manufacturers in Germany, Italy, Spain, the Netherlands, Austria and Greece, although the Netherlands was the only nation to signal a stronger pace of increase. France reported further job cuts.