Eurozone Manufacturing Activity Contracts Most In 3 Months

(RTTNews) - The euro area manufacturing activity shrunk the most in three months in March despite signs of positive momentum building in output, new orders and business sentiment, a survey compiled by HCOB and S&P Global showed on Tuesday.

The final manufacturing Purchasing Managers' Index fell to a three-month low of 46.1 in March from 46.5 in February. At 45.7, the flash reading was even weaker.

Manufacturing output extended the decrease to exactly one year. Nonetheless, the pace of decline was the softest since April 2023.

Similarly, new orders continued to fall but the downturn slowed over the past five months.

Manufacturers reduced their purchases of inputs as they preferred to use existing pre-production stocks. Further, suppliers' delivery times shortened to the greatest extent since last September. Goods producers made further inroads into their backlogs of work. The rate at which incomplete orders fell was its slowest since February 2023.

The decrease in workforce was moderate and unchanged from those seen so far this year.

On the price front, the survey showed that input prices decreased again in March and the decline was the least marked in a year. Output prices fell the most since last November.

The survey highlighted a pick-up in expectations among manufacturers. Optimism towards the outlook for production was the strongest since April 2023.

"It's a bit disheartening: over the last eight months, the manufacturing industry has been gradually climbing the Output PMI ladder, but it still finds itself on the basement staircase," Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

The economist said the progress to the next floor has yet to materialize, largely owing to the underperformance of the German and French industries.

"Given this, it comes as no surprise that our GDP nowcast model, incorporating PMI data, predicts a continuation of the recession in the manufacturing sector of the eurozone," said de la Rubia.

There was a marked divergence in performance among member countries.

Spain reported another moderate expansion and Italy recorded pick-up in conditions. Meanwhile, Germany and France remained mired in contraction.

Germany's manufacturing activity ended the first quarter firmly in contraction. The final manufacturing PMI dropped to 41.9 from 42.5 a month ago. The flash score was 41.6.

The French manufacturing sector endured another month of contraction. At 46.2, France HCOB final manufacturing PMI fell from an 11-month high of 47.1 in February.

Italy's manufacturing sector entered the growth territory for the first time in a year. The factory PMI posted 50.4 in March, up from 48.7 in February.

At the same time, Spain's manufacturing economy continued to expand with output growing the most in a year. The HCOB manufacturing PMI slid marginally to 51.4 in March from 51.5 in February.