Eurozone manufacturing output in May shrinks at the fastest pace in six months

Morgan Condon


LONDON (ICIS)–Eurozone manufacturing output fell by the strongest rate in six months in May, according to latest data from the Hamburg Commercial Bank (HVOB) and S&P Global on Thursday.

The slow down for both production and new orders caused prices at the factory gate to fall for the first time since September 2020 with both Purchasing Managers’ Index (PMI) readings for manufacturing falling further into contraction.

PMI (below 50 = contraction) May April Trend
Manufacturing PMI (1) 44.8 45.8 36-month low
Manufacturing Output (2) 46.4 48.5 6-month low

This is the second monthly contraction in a row for manufacturing, after modest growth in the first quarter. This is contrary to expectations of a slow start to the year followed by a steady recovery.

Poor demand has been the key driver in driving down sentiment, enabling producers to work through backlogs, which also fell at a quicker pace in May and for the twelfth consecutive month.

External demand was particularly poor. The drop in export orders registered the biggest plunge on record, since the survey began in June 1997.

Factory employment levels rose for the 28th month in a row, but at the slowest rate over this period.

Delivery times also got faster as more spare capacity became available.

As suppliers pricing falls coupled with diminished energy costs, manufacturing output costs fell at the fastest rate since February 2016.  Output prices decreased for the first time since September 2020.

The fall in input prices allowed producers flexibility with their pricing strategy, enabling prices at the factory gate to fall for the first time since September 2020.

For many countries in the bloc, manufacturing readings fell by the greatest extent since the beginning of the initial COVID-19 outbreak in May 2020.

In light of the poor sentiment, manufacturers have opted to work through inventories for the fourth month running, and to the greatest extent since October 2019 as purchasing activity sharply fell again in May.

Stocks of finished goods remained stable on the previous month.

Despite the fall in output data, manufacturers held resilient optimism that things would improve in the 12 month outlook,. Although current conditions weighed on expectations to a five month low, and below historic standards.

1. Manufacturing PMI is a composite index based on a weighted combination of new orders (0.30); output (0.25); employment (0.20); suppliers’ delivery times (0.15); stocks of materials purchased (0.10).

2. The Manufacturing Output Index is based on the survey question “Is the level of production/output at your company higher, the same or lower than one month ago?”

Front page picture shows warehouses at Kehrwiederfleet, Hamburg (image credit: Schoening/imageBROKER/Shutterstock)


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