Conditions in the Eurozone manufacturing sector picked up somewhat in May as countries in the currency bloc lifted coronavirus restrictions, but the zone’s factories were still far from healthy.
The IHS Markit manufacturing purchasing managers’ index (PMI) – a gauge of the sector’s health – rose to a final reading of 39.4 in May after plunging to a record low of 33.4 in April.
A score of under 50 officially indicates that the sector is still contracting. However, some economists have said PMI surveys are best read as guides to business sentiment during times of such uncertainty.
The survey data came as Eurozone countries continue to gradually reopen their economies after lengthy lockdowns. Coronavirus restrictions have decimated economies, causing demand to evaporate and disrupting supply chains.
Last month, the European Commission predicted the Eurozone economy will shrink by 7.7 per cent this year. That would be by far the biggest contraction since its inception.
Chris Williamson, chief business economist at data firm IHS Markit said: “The manufacturing downturn looks to have bottomed-out in April.”
“The improvement in part merely reflects the comparison against a shockingly steep fall in April, but more encouragingly was also linked to companies restarting work as virus lockdowns were eased.”
Nonetheless, Eurozone manufacturing firms continued to slash jobs. They laid off workers at a rate not seen since the height of the financial crisis in 2009. IHS Markit said companies were still adjusting to weak demand.
In a worrying sign for the Eurozone’s recovery, factory powerhouse Germany registered the worst manufacturing PMI score in the single-currency area. Italy recorded the best PMI, with a more than 14 point monthly increase.
Williamson said: “Whether growth can achieve any serious momentum remains highly uncertain.”
“Demand – both domestically and in export markets – looks set to remain subdued by social distancing measures,” he said. He added that high unemployment and falling corporate profits look set to continue for some time.