Manufacturing production, which also includes food and chemicals, in the euro area grew again in October, extending the current expansion for the eighth consecutive month. This is highlighted in the latest report from S&P Global, published today and based on data collected between October 9 and 24. The HCOB Eurozone Manufacturing PMI, an indicator of the overall health of the eurozone manufacturing sector compiled by S&P Global, reached 50 in October, indicating that operating conditions remained unchanged from the previous month. This stagnation follows a slight deterioration in September (49.8).

Although rising, the pace of growth remained moderate due to stagnant new orders and declining employment. Inventory depletion continued, with a decline in the volumes of both production inputs and finished goods, extending a prolonged sequence of inventory reductions. Specifically, input costs remained unchanged from September, but prices increased marginally.

Looking ahead, eurozone producers were optimistic that production levels would be higher over the next 12 months. However, expectations declined slightly over the course of the month and were weak by historical standards.

According to S&P Global, manufacturing conditions were more favorable in the southern eurozone in October. Greece (with a PMI of 53.5) and Spain (52.1) saw the most significant improvements, with indices rising from the previous month, a two-month high. The Netherlands (51.8), which had posted the strongest results in September, saw its expansion slow to a four-month low, and growth in Ireland (50.9) also lost momentum, hitting a 10-month low in October.

The contraction continued in Germany (49.6, a two-month high), France (48.8, a two-month high), and Austria, although in all three cases the rate of decline slowed. In Italy, manufacturing conditions "remained essentially unchanged." Italy ranks fifth among eurozone nations, with a PMI that reached 49.9 in October, a two-month high.

October, S&P Global emphasizes, marked the eighth consecutive monthly expansion of industrial production across the euro area. The growth rate was modest overall and slightly below the average recorded in the current sequence. The highest production levels were achieved despite stagnant new orders.

In the past three and a half years, euro area demand for goods has increased in only one month (August this year). New orders from abroad continued to weigh on factory sales, declining for the fourth consecutive month. Euro area manufacturers reported lower employment levels in October, extending the current sequence of job losses to nearly two and a half years.

The rate of decline increased slightly, reaching the highest level since June. Despite this, backlogs were reduced, indicating the absence of pressure on production capacity. The burnout rate was modest and the lowest in the last three months.

Inventory levels were reduced again across the euro area in October, extending an already prolonged period of inventory reductions. Furthermore, both pre-production and post-production inventories were reduced at rates above their respective series averages.

Purchases of raw materials and intermediate products decreased for the fortieth consecutive month at the start of the fourth quarter, even as average supplier delivery times continued to lengthen. Indeed, the extent of reported delays was the highest in the last three years.

Regarding price trends, October survey data showed no change in companies' operating costs, following a marginal decline in the previous month. However, prices increased for the first time since April. Profit margins were still limited, with only a marginal rate of price inflation.

Commenting on the PMI data, Cyrus de la Rubia , chief economist at Hamburg Commercial Bank, said: "In the eurozone manufacturing sector, we can at best speak of a very delicate beginning of an economic recovery. Production has increased for eight consecutive months, but there is no real momentum, as it is growing at roughly the same modest pace as in previous months. Meanwhile, demand in the eurozone economy has remained subdued, with new orders stagnating at the same level as the previous month."

"Job cuts," de la Rubia continues, "have continued and even increased slightly. This is due to weak demand, which is forcing companies to reduce costs or increase productivity. Uncertainties in the supply chain, particularly regarding basic semiconductors, may have contributed to longer delivery times and could weigh on production in sectors such as automotive and mechanical engineering. For this reason alone, it is unlikely that many companies will be in a rush to hire additional staff in the short term."

The expert concludes: "The situation in the eurozone manufacturing sector can be summarized as fragile in Germany, in recession in France, persistently weak in Italy, and with only modest growth in Spain. The tense political situation in France is not only clearly contributing to the renewed decline in production there, but is also reflected in a sharp decline in the index of future production."