Manufacturing PMIs Remain Contractionary, But Improvement Seen vs April

The German, French and Eurozone-wide manufacturing PMIs remained in contractionary territory in May, with the latter two releases seeing small downward revisions.

• However, most Eurozone countries nonetheless saw an improvement in their manufacturing PMIs in May. From the Eurozone-wide release: “While factory output fell, the contraction was the softest in just over a year and only marginal overall”.
• While this may be suggestive of a nascent recovery in the Eurozone manufacturing sector, the employment outlook remains weak: “Employment across the euro area manufacturing sector was decreased further amid evidence of surplus capacity, extending the current period of factory job losses to a year”.
• In Germany: “Backlogs of work continued falling sharply during May”…“As such, another round of job cuts was seen across the manufacturing sector”.
• Similarly in France, “An absence of capacity constraints also led French factories to reduce their workforce numbers. Anecdotal evidence suggested this was achieved by the non-renewal of temporary contracts”.
• While Germany continues to register the lowest manufacturing PMI readings of the “big four” economies, it was only 0.2 points below Italy in May (versus a gap of 8.5 points in March this year).
• Looking at the German print, “The main positive directional influence came from new orders”… “A near-stabilisation in exports sales was a key factor, as firms highlighted improved demand from both China and the US”.