Eurozone Manufacturing Sector Shrinks For Tenth Straight Month

(RTTNews) - Euro area manufacturing activity contracted for the tenth straight month in April with the latest fall being the biggest since May 2020 on declining production and orders, final data from S&P Global and Hamburg Commercial Bank showed Tuesday.

The HCOB factory Purchasing Managers' Index dropped to 45.8 in April from 47.3 in March. Nonetheless, the reading was slightly above the flash of 45.5.

The score has remained below the 50.0 no-change mark that separates growth from contraction for a tenth straight month. Moreover, the latest deterioration was the sharpest since May 2020, during the first wave of the COVID-19 lockdowns.

In contrast to back-to-back expansions in the previous two survey periods, manufacturers reported a renewed fall in output during April. At the same time, new orders declined at the fastest pace in four months.

Signaling spare capacity in the manufacturing sector, backlogs of work dropped again. With falling factory orders, purchasing activity continued to decrease as firms reduced production requirements.

Supplier delivery times shortened to the greatest extent since the survey began in 1997. Further, pre-production inventories across the euro area dropped for a third consecutive month. Manufacturers were optimistic of growth over the coming twelve months. Companies expanded their workforce for the twenty-seventh consecutive month. Nonetheless, the pace of job creation was the weakest since February 2021.

Regarding prices, the survey showed that greater balance between supply and demand drove manufacturers' cost lower. The fall in average input costs was the fastest in nearly three years. Meanwhile, factory gate charges were the slowest since November 2020.

Although selling prices and input prices in manufacturing sector, central bankers have no reason to relax, Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

That is because both the PMI flash services data for April and the Eurostat data available for services inflation continue to reflect significant price pressures, Rubia added.

Eurozone inflation rose slightly to 7.0 percent in April from 6.9 percent in March, official data revealed Tuesday.

Meanwhile, core inflation that excludes prices of energy, food, alcohol and tobacco prices, slowed slightly to 5.6 percent from 5.7 percent a month ago, the Eurostat said. Inflation data came ahead of the monetary policy announcement from the European Central Bank on May 4. Economists have forecast a 25 basis point hike this month.

At the March meeting, the ECB had increased the key refi rate by 50 basis points as inflation is forecast to remain high for too long.

Within the big-four economies, Germany's factory activity registered the biggest fall in April despite rapidly easing supply constraints, PMI survey showed.

The final manufacturing PMI slid to 44.5 in April from 44.7 in March. This was the lowest reading since May 2020 but above the flash score of 44.0.

France's final manufacturing PMI posted 45.6 in April, down from 47.3 in March but up from the flash score was 45.5.

The French index has remained in sub-50.0 contraction zone for a third month in a row. The score suggested the fastest deterioration since May 2020.

Italy's manufacturing sector slipped back into the contraction zone for the first time this year and also marked the steepest contraction since last October. The PMI registered 46.8, down from March's 51.1.

Spain manufacturing activity also re-entered the contraction territory in April due to a fresh fall in new orders and a slowdown in output growth. The HCOB manufacturing PMI dropped to 49.0 from 51.3 in the previous month.