Eurozone manufacturing activity expanded in August 2024 for the first time since mid-2022, with the PMI hitting a 3-year high of 50.7. Domestic demand surge offsets weak exports, led by Greece and Spain.
HCOB Survey Shows August PMI at 50.7 as Domestic Demand Surge Offsets Weak Export Orders
Bengaluru, September 1 – The eurozone’s manufacturing sector finally emerged from a prolonged contraction in August expanding for the first time since mid-2022 according to the latest HCOB Purchasing Managers’ Index (PMI) survey. The headline index rose to 50.7, its highest level in over three years up from 49.8 in July and surpassing the preliminary estimate of 50.5.
The crucial reading above the 50.0 threshold—which separates growth from contraction—signals a turning point for the region’s industrial economy driven primarily by a robust recovery in domestic demand and output.
Key Drivers of the Recovery
The August data revealed several encouraging trends:
- Output Growth: Factory output increased at its strongest pace since March 2022.
- New Orders: Incoming new orders, a critical gauge of future demand, expanded at their fastest rate in nearly three and a half years.
- Domestic Strength: The recovery was largely fueled by domestic orders, which successfully offset continued weakness in demand from foreign markets.
Leadership Insight: A “Broadening” Recovery
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, highlighted the significance of the broad-based recovery: “The economic recovery in the manufacturing sector is broadening… Incoming orders also offer hope for a sustainable recovery. Domestic orders have risen and are offsetting the weakening demand from abroad. In fact, the best remedy against U.S. tariffs may be to strengthen domestic demand.”
He added that optimism is growing, with many manufacturers expecting higher production levels over the next 12 months.
A Regional Breakdown: Southern Europe Leads the Charge
The recovery was not uniform across the bloc, with southern European economies leading the expansion:
- Greece: PMI of 54.5
- Spain: PMI of 54.3
- France & Italy: Both recorded slight expansions above the 50.0 mark.
Germany, Europe’s largest economy and manufacturing powerhouse, saw its PMI rise to a 38-month high of 49.8—a whisker away from growth. This offers a glimmer of hope for an economy that shrank by 0.3% last quarter partly due to slowing demand from its top trading partner the United States.
Inflation and ECB Policy Implications
Despite the upbeat activity data, the survey contained mixed signals for policymakers:
- Input Costs: Rose marginally.
- Output Charges: Prices charged by manufacturers reduced slightly.
This environment of stable costs gives the European Central Bank (ECB), which held its key rate at 2% in July, further room to consider rate cuts in the autumn, especially if the economic outlook weakens under the pressure of U.S. trade tariffs.
The manufacturing recovery stands in contrast to a separate European Commission survey that showed a deterioration in overall economic sentiment for the eurozone in August, highlighting the fragile and nascent nature of the industrial rebound.
