Day: June 3, 2024

Downturn in the euro area manufacturing activity softened in May as production moved closer to stabilization and orders fell at a slower pace amid the rising business sentiment, final HCOB survey results from S&P Global showed on Monday.

The manufacturing Purchasing Managers’ Index rose to 47.3 in May from 45.7 in April. The flash estimate was 47.4.

Although the reading was below the neutral 50.0 mark, it was the highest since March 2023, indicating the slowest deterioration of the manufacturing sector for over a year.

There was a near stabilization of production in May. Factory output dropped at the slowest pace in just over a year and new orders posted the slowest decrease in two years.

Backlogs of work continued to fall as subdued demand conditions led factories to use outstanding orders as a means to support output. The rate of depletion was the weakest since August 2022.

Employment dropped further amid evidence of surplus capacity, extending the current period of factory job losses to a year. That said, the rate of decrease matched that seen in April and was moderate.

Purchasing activity continued to decline but the pace of decrease was the softest since September 2022. This partly reflected sufficient input stock levels and there was reduction in manufacturers’ pre-production inventories.

On the price front, the PMI survey showed that input costs decreased in May, stretching the current sequence of decreases that commenced in March 2023. There was further reduction in the price of goods leaving the factory gate.

Manufacturers’ optimism towards production prospects over the coming twelve months improved with the level of positive sentiment hitting the highest since February 2022.

The improvement was reported across the majority of the countries in the currency bloc. Germany and France registered slower contraction.

At the same time, Spain grew at a faster growth. By contrast, situation in Italy deteriorated the most in five months.

The survey showed that there were much slower declines in both German output and new orders than those seen in April. The final HCOB manufacturing PMI hit a four-month high of 45.4 in May, up from 42.5 in April and also matched the flash estimate.

Although France’s manufacturing sector remained challenged by sustained weakness in new orders, the overall activity contracted only slowly in May. The corresponding indicator posted 46.4 in May compared to 45.3 in April. The preliminary reading was 46.7.

Italy’s manufacturers reported a sharp reduction in order book volumes, which in turn lowered production. The HCOB manufacturing PMI slid to a five-month low of 45.6 in May from 47.3 in April.

On the back of increasing production and new orders, Spain’s manufacturing growth accelerated in May. The PMI improved to a 26-month high of 54.0 from 52.2 in April.

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The UK manufacturing sector returned to growth in May as production grew the most in more than two years on improved order intakes, final survey data released by S&P Global revealed on Monday.

The manufacturing Purchasing Managers’ Index advanced to 51.2 in May from 49.1 in April. This was the highest reading since July 2022 but a tick below the initial estimate of 51.3.

The headline PMI registered above the threshold 50.0 mark in two out of the past three months.

Manufacturing output climbed at the quickest pace since April 2022. Output growth was supported by improved intakes of new work, stronger market conditions and efforts to complete existing contracts.

The upturn was centered on the domestic market as new export orders decreased for the twenty-eight month in a row.

In line with the recovery in current market conditions, business sentiment improved in May. Optimism among manufacturers was the strongest since February 2022.

The survey showed that employment decreased for the twentieth consecutive month, while inventories of finished goods and purchases were both depleted.

Input buying increased slightly in May, halting a 22-month sequence of reduced purchasing activity. Suppliers’ delivery times lengthened for the fifth straight month, mainly due to transportation issues such as the ongoing crisis in the Red Sea.

Input costs rose for the fifth month in a row albeit to a lesser extent than in April. Data painted a mixed picture for trends in purchasing costs. The rate of output price inflation hit its highest level in a year after strengthening in each of the past five months.

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Only supermarkets, beverage retailers and specialized sports goods stores in Germany are likely to register any significant growth in sales as the country hosts the UEFA Euro 2024 football tournament that kicks off in the middle of the month, the ifo institute said Monday.

The ifo business confidence indicator for the retail industry rose to -13.3 points in May from -14.5 points in April, mirroring slightly better business expectations.

However, the think tank said the outlook for retailers remains pessimistic with the indicator for assessments of the current business situation remaining unchanged at -2.1 points.

“The European Football Championship is unlikely to deliver any noticeable sales impetus for retail as a whole,” ifo expert Patrick Hoppner said.

“Only supermarkets and beverage retailers, as well as specialist sports stores, might feel a positive impact from this major sporting event,” Hoppner said.

Prices are likely to rise in many lines of retail business in the short term, mainly in food retail and in shops selling electrical goods and electronic household appliances.

“Prices for bicycles and consumer electronics products, on the other hand, might well fall in the near future,” Hoppner said.

Official data released on Friday showed that retail sales in Germany declined more than expected in April, largely led by a slump in sales of food.

Meanwhile, the price expectations survey by ifo showed last week that more companies in manufacturing and wholesale plan to raise their prices than in the previous month, while such expectations sunk in the consumer-related industries.

The institute expects inflation to fall in coming months and reach below 2.0 percent for the first time since March 2021, in August.

The GfK survey showed that the propensity to buy among German consumers failed to gain any benefit from the increasing economic and income expectations in May.

Higher prices for food and energy as well as the ongoing uncertainty forced households to set aside financial resources for future rather than spending, GfK said.

Germany’s harmonized inflation climbed to 2.8 percent in May from 2.4 percent in April, underpinned by an acceleration in services inflation.

The stickiness of inflation is likely to cause concern for the European Central Bank that is preparing to reduce interest rates on Thursday, but recent data suggest there is limited scope for any easing beyond that this year.

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US construction spending shrunk unexpectedly in April amid declines in both private and public construction, preliminary data from the U.S. Census Bureau showed Monday.

Construction spending dipped 0.1 percent to $2,099.0 billion from the revised estimate of $2,101.5 billion in March.

Spending was expected to grow 0.2 percent after a 0.2 percent decrease in March.

The April figure was 10.0 percent higher than the April 2023 estimate of $1,907.8 billion.

In April, spending on private construction was $1,611.9 billion, which was 0.1 percent lower from the revised March estimate of $1,613.3 billion.

Residential construction grew 0.1 percent to $890.4 billion from a revised $889.5 billion in March. Non-residential construction shrunk 0.3 percent to $721.5 billion from a revised $723.8 billion in the previous month.

Public construction spending totaled $487.1 billion in April, down 0.2 percent from the revised March estimate of $488.2 billion.

With this, educational construction decreased 0.2 percent to $103.5 billion from a revised $103.6 billion in the previous month. Highway construction shrunk 0.5 percent to $149.6 billion from the revised March estimate of $150.4 billion.

During the first four months of this year, construction spending totaled $635.5 billion, up 10.9 percent from the $573.0 billion for the same period last year.

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