Eurozone factory output ends first quarter on strong note, cost pressures ease: PMI

[LONDON] Eurozone manufacturing output ended its best quarter since early 2022 in June, with easing cost pressures giving relief to factories even as sluggish export demand partly dragged overall activity growth to its lowest since February, a survey showed.

The S&P Global Eurozone Manufacturing PMI slipped to a four-month low of 51.4 in June from May’s 51.6, but remained above the 50.0 threshold separating growth from contraction for a fifth month.

The reading was just above a preliminary estimate of 51.3.

“A further rise in manufacturing output in June adds to signs of encouraging resilience in the eurozone economy,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

“June’s expansion in fact rounds off the strongest calendar quarter for euro area manufacturing production since the opening months of 2022, and will offset the recent decline that’s been recorded in the services economy.”

“This sustained growth was accompanied by a welcome cooling of cost pressures, largely reflecting the sharp drop in oil prices seen during the month alongside an easing of supply worries,” he added.

A Reuters poll published at the start of June predicted a 0.1 per cent expansion of the economy this quarter.

New orders returned to modest growth in June after stagnating in May, though the increase was only marginal. Export orders remained a slight drag.

The output sub-index rose to a two-month high of 51.7 in June from 51.3. Spain and France were the only countries in the survey to record declines.

SEE ALSO

Iran energy shock to cut eurozone growth by 0.4 percentage point: ECB

ECB’s Lagarde says Europe is getting more resilient to economic shocks

ECB says case for another rate hike not as strong now

Factory headcount continued to shrink though the pace of job losses moderated.

On prices, input cost inflation – while still elevated – fell to its softest pace since March, snapping a run of accelerating pressure stretching back to September. Output charge inflation also eased and was at a three-month low offering some relief to buyers.

The European Central Bank raised interest rates in June as a war-related energy cost surge pushed inflation above 3 per cent, well in excess of its 2 per cent target.

S&P Global noted that most survey responses were collected before the signing of a memorandum of understanding for a ceasefire between the United States and Iran on Jun 17, meaning that the full impact on supply chains and energy costs is not yet captured in the data.

Business confidence rose to a four-month high in June, recovering further from a 17-month low in April, but sentiment remained slightly below its long-run historical average. REUTERS