Manufacturing PMI Outperforms; Output Charges Increase

Spanish May manufacturing PMI was stronger-than-expected at 54.0 (vs 52.6 cons, 52.2 prior), the highest level since March 2022. The Eurozone flash May PMI had already signalled outperformance amongst Eurozone countries ex-Germany and France, meaning Bunds saw limited reaction on release.

Details show that output charges rose in May following a rise in raw material prices, providing evidence that core goods disinflation may stall in the months ahead.

Key notes from the release:

• “Central to the latest expansion of the manufacturing sector were concurrent rises in output and new orders”…. “Panellists noted a more positive demand environment, with clients increasingly willing to commit to new business”.
• “The upturn was predominately driven by the domestic market; new export orders increased, but at a noticeably slower pace than overall order books”
• “Manufacturers serviced higher production through an expansion of both purchasing activity and employment numbers in May”.
• “Higher staffing numbers in May reflected increased current and expected production requirements. Indeed, forecasts for output remained positive in May”.
• “Input cost inflation rose to its highest level for 15 months amid reports of a general rise in raw material prices”…. “The response by firms was to raise their own output charges”.