Eurozone manufacturing decline eases as PMI hits five-month high

The ongoing deterioration of the eurozone manufacturing sector continued for the 28th straight month in October, though the decline eased slightly, according to a survey from S&P Global and Hamburg Commercial Bank (HCOB).

The HCOB eurozone manufacturing purchasing managers' index (PMI) improved to 46.0 last month, up from 45.0 in September and the highest level reached in five months.

Nevertheless, the index still remains firmly entrenched in negative territory, indicated by any figure below the neutral 50-point mark.

The current slump, which began in mid-2022, marks the longest manufacturing downturn since the PMI surveys started in 1997.

Output continues to be constrained by a ongoing declines in new factory orders, causing workforce numbers to be reduced further. And while contractions in production, sales and employment all softened over the month, business confidence slipped to a one-year low, HCOB said.

"There is one bit of good news in these numbers: the recession in the manufacturing sector did not deepen further in October," said Cyrus de la Rubia, chief economist at HCOB, who calculated that manufacturing output could shrink eurozone GDP by 0.1% in the fourth quarter.

"It is not encouraging that inventory drawdowns for purchased materials continue at an unusually high pace. The COVID-19 crisis is still leaving its mark here. The ongoing reduction in inventories is obviously related to the fact that companies purchased and stockpiled materials and intermediate goods at an unprecedented scale in 2021 and 2022. Sluggish global demand gives companies no reason to restock, which in turn weighs on the economy."