The reading is just a marginal improvement to May but it reaffirms some added stabilisation to the manufacturing sector in the euro area this year at least. The pick up in sentiment in Germany is the most notable but we'll have to see if this can carry over to the second half of the year. HCOB notes that:
“There are signs of some stabilization in the manufacturing sector. Companies have now expanded production slightly for the fourth month in a row, order intake has ceased to fall, and slightly longer delivery times also indicate that demand is picking up a bit. Against the backdrop of numerous uncertainties - US tariffs, the crisis in the Middle East, and Russia's ongoing war against Ukraine - this can certainly be seen as a sign of resilience. However, it also has to do with the fact that, after years of recession, the economic cycle usually turns at some point because old machines need to be replaced, cars can no longer be repaired, and the necessary modernization of factory buildings can’t be postponed any further.
“Encouragingly, four of the eight eurozone countries where the PMI survey is conducted are now in expansion territory. Germany is not one of them, but the situation here has nevertheless improved somewhat. However, France, Italy, and Austria are putting the brakes on the eurozone’s growth, as their downturn has recently deepened. If Germany enters the growth zone, which we believe is likely given the new government's growth package, among other things, these countries could receive a positive boost, as Germany is their most important export destination.
“A relatively high degree of optimism can be observed among manufacturers. In June, this indicator rose to its highest level since February 2022. This improved sentiment is partly due to Germany, where expectations of producing more in one year than today have risen to a 40-month high. The mood has also improved in Spain, while confidence has declined somewhat in France and Italy. This is in line with the general environment, as there is growth in Spain, while the manufacturing sector is shrinking in France and Italy.”
This article was written by Justin Low at www.forexlive.com. Read More Details
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