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Eurozone manufacturing sector slumps further in May

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Eurozone manufacturing sector slumps further in May

The eurozone manufacturing sector remained in contraction territory for the fourth straight month as order books and new work continued to decline, final May data from IHS Markit showed.

The final eurozone manufacturing purchasing managers' index, or PMI, came in at 47.7 in May, down from 47.9 in April. The reading matched the preliminary and Econoday consensus estimate but remained below the 50 mark that separates expansion from contraction.

The bloc saw weak domestic and foreign demand, as reflected by a fall in new orders, especially in the export sector. Output and new work continued to decline in May.

The decline in the bloc's manufacturing activity was led by Germany, which continued its fall despite a softer decline in output and new orders. The German PMI stood at 44.3 in May, marginally down from April's 44.4, reflecting a slump in the car industry and effects of the U.S.-China trade tension.

Meanwhile, the French manufacturing sector expanded in May. The PMI edged up to 50.6 from 50.0 in April, owing to a slower fall in production and sales and a rise in employment.

Italy's manufacturing sector registered the softest deterioration in May since September 2018 as the index ticked up to 49.7 from 49.1 in April.

Business confidence in the eurozone improved in May, with Italy showing a high degree of optimism. Elsewhere, German manufacturers remained pessimistic, while French manufacturers had a lower level of confidence compared with April.

"A fourth successive monthly drop in output and further steep decline in new orders underscored how the sector remains in its toughest spell since 2013," said Chris Williamson, chief business economist at IHS Markit. "Trade wars, slumping demand in the auto sector, Brexit and wider geopolitical uncertainty all remained commonly cited risks to the outlook, and all have the potential to derail any stabilization of the manufacturing sector."