London (Reuters) – Manufacturing activity in the euro zone has shown new signs of recovery in June, new orders that have ceased to decrease for the first time in more than three years, which suggests that the sector is at least temporarily stabilized, shows a survey published on Tuesday.

The final composite index of purchasing directors (PMI) of the euro zone, compiled by S&P Global, emerged at 49.5 in June, its highest level since August 2022, against a “flash” estimate at 49.4. It was also 49.4 in May.

However, the index remains below 50 separating growth and contraction of the activity for the 29th consecutive month.

“We observe signs of stabilization in the manufacturing sector. Companies have slightly increased their production for the fourth consecutive month, the orders have ceased to drop and slightly longer delivery times also indicate a slight resumption of demand,” comments Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The manufacturing production index, however, fell to 50.8 against 51.5 in May, thus marking its lowest level in three months, even if it remains in territory of expansion.

The sub-index measuring the new orders increased to 50.0, ending a decrease period of 37 months, and export orders have stopped retreating for the first time since March 2022, a positive sign for future production.

Despite the improvement of order books, manufacturers continued to reduce their workforce. The employment index has been below the 50 threshold for two years.

The survey also shows strong disparities within the euro zone. Ireland recorded the highest PMI index with a score of 53.7, its highest level in 37 months, while Greece, Spain and the Netherlands also displayed values ​​greater than 50.

Compared, the German manufacturing PMI index remained in the contraction zone, at 49.0, even if it is its highest level in almost three years.

France, Italy and Austria have recorded drops, which weighed on the overall performance of the block.

“If Germany is entering the growth zone, which, in our view, is likely given the growth forecasts of the new government, among other things, these countries could receive a positive boost, because Germany is their most important export destination,” added Cyrus de la Rubia.

Business confidence has continued to improve, reaching its highest level since February 2022, German manufacturers being particularly optimistic about the prospects for future production.

Purchase costs have decreased for the third consecutive month, contributing to a slight reduction in prices at the exit of factories.

(Written by Jonathan Cable; Claude Chendjou, edited by Blandine Hénault)

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