Eurozone manufacturing PMI showing signs of recovery
By Josh White
Date: Monday 03 Mar 2025
(Sharecast News) - The eurozone's manufacturing sector showed signs of improvement in February, according to fresh data released on Monday, with the HCOB eurozone manufacturing purchasing managers' index (PMI) rising to a two-year high of 47.6 from 46.6 in January.
While still in contraction, the latest data signalled that the downturn was at its mildest level since early 2023, with factory output nearing stabilization as the drag from weak demand eased.
Production across the region continued to decline, but at the slowest pace in nine months.
New orders, both domestic and international, fell at their softest rate in nearly three years, reflecting a gradual improvement in demand conditions.
Manufacturers were also less aggressive in cutting back on input purchases and inventory levels.
Despite the positive signs, the sector faced challenges, particularly in employment.
Factory job losses accelerated, with the rate of workforce reductions reaching a four-and-a-half-year high.
Cost pressures also intensified, as input prices rose at the fastest pace in six months.
However, manufacturers struggled to pass on these higher costs, leading to a slight decline in output prices.
At the national level, most eurozone countries reported improving conditions, though contraction persisted in key economies such as Germany, France, Italy, and Austria.
The Netherlands saw manufacturing conditions stabilize after months of deterioration, while Ireland recorded its strongest expansion in a year.
In contrast, Spain's manufacturing sector slipped into decline for the first time in over a year.
Looking ahead, eurozone manufacturers remained optimistic, with confidence levels among the highest seen since early 2022.
The sector's outlook was bolstered by expectations of further stabilising in demand and production in the months ahead.
"It's still too early to call it a recovery, but the PMI hints that the manufacturing sector might be finding its footing," said Dr Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
"New orders are falling at the slowest pace since May 2022, and production is edging closer to stabilising. So, after almost three years of recession, we could see a bit of growth in the coming months.
"A quick formation of a government in Germany, political stability in France, and a deal with the US on key tariff issues would definitely help."
Dr de la Rubia noted that job cuts sped up in February, but added that it was not uncommon for layoffs to continue even after a recession ends.
"As for the four big eurozone countries, Spain is still showing growth in production, but its manufacturing PMI, which has been doing rather well for the past three years, dipped below the 50 mark due to declining new orders.
"Most companies are staying optimistic about the future - the confidence index is just above the long-term average.
"This is surprising considering the tariff threats from the US, but companies know that a recession is usually followed by a recovery.
"There are also signs that Russia's war against Ukraine might end this year, and the expected political stabilisation in Germany is certainly a positive element, too."
Reporting by Josh White for Sharecast.com.
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