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This article was written by Justin Low at www.forexlive.com.
Key findings:
Comment:
Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“Most people have got so used to gloomy headlines from the industrial sector that the good news often slips under the radar.
That is why it is worth looking beyond the headline PMI figure, which dipped slightly and is still in contraction territory. The
broader picture actually shows some encouraging signs. Production has now increased for the third month in a row, and
foreign orders have been on the rise for two straight months.
“What’s more, the uptick in output is not limited to just one area
– it is showing up across the board, in capital goods, intermediate goods and consumer goods. That is a solid sign of broad-
based improvement. It is also positive that companies have barely scaled back their purchases of intermediate goods, after
falls in each month since mid-2022. Most striking is perhaps that business sentiment is the most optimistic since February
2022. That likely has a lot to do with the formation of a new government, the promise of tax breaks for investment, a big
infrastructure package, and plans to boost defence spending.
“Some of the recent production increase may be tied to US importers rushing to get ahead of potential new tariffs. But other
factors, like expected interest rate cuts, lower energy prices, and a cyclical rebound after a downturn lasting more than two
years, are probably helping too. There is a decent chance this momentum will carry on, even if things slow down a bit.
“Manufacturing workforce numbers have been falling continuously since mid-2023. With a certain delay, this has led to
higher labour productivity in manufacturing, which PMI data show has been rising again since late 2024. It is likely to take a
few months before a possible recovery in the manufacturing sector is reflected in higher employment levels. However, it can
be assumed that the emerging trend of a slowdown in job cuts will continue for the time being.”
This article was written by Giuseppe Dellamotta at www.forexlive.com.
It’s a modest improvement compared to April with output seen increasing as demand conditions near back some semblance of stabilisation. So, that’s something to be optimistic about at least even if this is just but a small part of the French economy. HCOB notes that:
“Since 2023, France’s manufacturing sector has been in a state of contraction. This is evident in our HCOB Manufacturing
PMI, which has remained consistently below the no-change threshold of 50.0 since February 2023. However, a turning point
may be near. The PMI has steadily improved over the course of this year and now stands at 49.8—just shy of the expansion
mark.
“Has the turnaround in demand and production already begun? There are certainly further signs of recovery. Notably, output
increased for the second consecutive month in May. New orders are hovering at the edge of expansion, while foreign
demand has weakened slightly faster after the respective HCOB index reached a 38-month high previously. Ongoing
uncertainty stemming from the global trade conflict continues to act as a non-tariff barrier and will likely weigh on the sector
in the months ahead. At the same time, European rearmament initiatives, a more accommodative monetary policy from the
ECB, and efforts to reduce regulatory burdens at the EU level could help offset the negative impact of trade restrictions.
“These tailwinds are also reflected in business expectations, which have recovered significantly from their recent low
towards the end of 2024. Encouragingly, the labor market in France’s manufacturing sector is also benefiting. For the first
time in two years, firms are once again increasing their demand for additional staff. Unsurprisingly, better demand conditions
have led to a renewed build-up of backlogs.
“However, price developments remain subdued. Input prices are rising only moderately, primarily due to higher raw material
costs. At the same time, intense competition among firms is putting downward pressure on output prices.”
This article was written by Justin Low at www.forexlive.com.
Key findings:
Comment:
Commenting on the PMI data, Nils Müller, Junior Economist at Hamburg Commercial Bank, said:
“Italy’s manufacturing sector showed further signs of stabilisation in May, with the headline PMI holding just below the
neutral 50.0 mark. While it dipped marginally from April, the underlying dynamics suggest a sector cautiously emerging from
a prolonged downturn. Most notably, output rose for the first time in over a year, driven by new client wins and tentative
signs of demand recovery, particularly from European export markets.
“The improvement in output contrasts with continued weakness in new orders, which declined for a 14th consecutive month.
However, the pace of contraction was the softest in over a year, hinting at a potential turning point. Export orders, in fact,
registered their first expansion in more than two years, buoyed by stronger European demand. Still, domestic demand
remains subdued, with anecdotal evidence pointing to weakness in key sectors such as autos and electronics, keeping
overall order books under pressure.
“Employment continued to decline, albeit modestly, reflecting both voluntary attrition and cautious hiring decisions amid
lingering uncertainty. Meanwhile, input costs fell for the first time since late 2024, thanks to lower raw material and freight
prices. This easing of cost pressures, combined with stable output prices, suggests inflationary forces are receding, offering
some relief to manufacturers and supporting the broader disinflation narrative across the eurozone.
“Looking ahead, the sector’s outlook is cautiously optimistic. More than half of surveyed firms expect output to rise over the
next year – a trend that may be supported by a stronger euro, declining energy prices, and further monetary policy easing by
the ECB. However, trade tensions remain a key risk. Prime Minister Meloni’s mid-May visit to Washington yielded no
immediate tariff relief, leaving Italian exporters exposed to policy uncertainty. For now, the sector appears to be finding its
footing, but the path to sustained recovery remains uneven.”
This article was written by Giuseppe Dellamotta at www.forexlive.com.
That’s a bit of a setback with the reading being the lowest since December 2023. It comes as both production and new orders declined sharply, with protectionism fears weighing on industry sentiment and outlook according to Procure.
This article was written by Justin Low at www.forexlive.com.
Japan Capital Spending Q1 3025 +6.4% y/y
Capital Spending Ex Software +6.9% y/y
Company Sales +4.3% y/y
Company Profits +3.8% y/y
A bit of a mixed bag of results here. Profits not rising as much as expected and well below Q4 2024.
USD/JPY not a lot moved:
This article was written by Eamonn Sheridan at www.forexlive.com.
This article was written by Justin Low at www.forexlive.com.