The manufacturing economy of the eurozone saw a further decline, dropping to 45.7 points in April 2024, a decrease for the fourth consecutive month, according to monthly purchasing managers survey data from Hamburg Commercial Bank, produced in collaboration with the data firm S&P Global. This extended the period of overall contraction to 22 months, signalling that the sectoral recovery is facing headwinds. Despite some positive signs, such as a slight uptick in business confidence and a reduction in manufacturers’ operating costs, the overall trend suggests a worsening situation, stated a HCOB press statement on Thursday 2 May.

Regional variations

The report observed differences in country-level trends, with certain southern parts of the eurozone experiencing growth, while declines in countries like Germany and Austria softened without putting a stop to the overall downward trend. Notably, the Netherlands saw an improvement in manufacturing conditions for the first time since August 2022.

Production and sales

Despite efforts to mitigate the effects of reduced new orders, euro area manufacturers encountered a steeper decline in production, accompanied by accelerated reductions in purchases. This decrease in manufacturing output occurred despite a slight easing in the rate of decline for the second consecutive month.

Additionally, the survey data revealed a marked fall in total sales, with a particularly sharp decline in new orders from abroad. This heightened pressure from export markets contributed to the challenges faced by euro area goods producers.

Employment

In response to these challenges, manufacturers delved deeper into their order backlogs in April, resulting in sustained job losses and an extension of the ongoing period of declining employment. However, the overall rate of decline in employment was moderate, marking the softest figure seen in seven months, stated HCOB. Moreover, eurozone factory input costs continued to decrease in April, albeit at a slower rate, while prices charged were lowered for the twelfth consecutive month.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, expressed concerns about the deteriorating situation in the eurozone’s manufacturing sector. He stated, “Output shrank at a similar pace as in the months before, and companies have reduced their purchases at an accelerated rate. Compounding the issue, there is no sign of a turnaround in the inventory cycle, but instead, we saw a sustained trend of depleting stockpiles of both purchased and final goods in April.”

He emphasised the absence of demand, crucial for the manufacturing recovery, stating, “A plethora of evidence highlights the stark absence of demand, as evidenced by a rapid decline in new orders, unmatched in speed over the past four months and devoid of international support.” Rubia warned, “This comprehensive snapshot portends a postponement of any semblance of recovery, likely extending well into the summer.”

Rubia also noted disparities between countries, with Spain showing sustained growth while Germany faced a pervasive downturn across key sectors. He concluded, “A recovery often starts with some positive momentum in the capital goods sector. Instead, and in a worrying sign, capital goods have been hit particularly hard in April as demand for these goods fell at an accelerated pace in the top three euro countries [Germany, France and Italy].”