The manufacturing sector in the euro area has shown signs of stabilization, remaining in contraction for February but achieving its highest performance in 24 months. The finalized HCOB Eurozone Manufacturing PMI, which gauges the overall health of eurozone factories, rose to 47.6 in February, up from a previous 46.6 in January and a flash estimate of 47.3.
This increase signals a potential easing of the downturn, with factory production nearing stability and a noticeable deceleration in the decline of new orders, as highlighted by the latest data from Hamburg Commercial Bank and S&P Global released on Monday. Manufacturers have adopted a less aggressive stance regarding the reduction of pre-production inventory and purchasing as demand pressures begin to ease.
In terms of performance across member countries, Germany, France, Italy, and Austria all reported softer contractions in their manufacturing sectors, while the Netherlands showed signs of stabilization after enduring a seven-month downturn, and Ireland experienced robust growth. Conversely, Spain saw its manufacturing sector decline for the first time in just over a year. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, stated, "It's still too early to declare a recovery, but the PMI suggests that the manufacturing sector might be starting to find its footing.
New orders are declining at their slowest pace since May 2022, and production is edging closer to stabilization." He continued, "After nearly three years of recession, we may anticipate glimpses of growth in the coming months." Despite these increasing signs of stability, the sector continues to face challenges in terms of employment.
Job losses have escalated at a rate not seen in over four years. Even so, there is a notable level of optimism among manufacturers regarding future growth prospects, which is reportedly at its peak since the onset of the Russia-Ukraine conflict in 2022. De la Rubia remarked, "Most companies are maintaining an optimistic outlook on the future.
The confidence index is slightly above the long-term average, which is unexpected given the tariff threats posed by the US. However, companies are aware that a recession is commonly followed by a recovery.".