Eurozone Manufacturing Sees First Growth Since 2022 Amid Domestic Demand Surge

Eurozone manufacturing activity has shown growth in August for the first time since the middle of 2022, according to a recent survey. Driven by a notable increase in domestic demand and output, the HCOB Eurozone Manufacturing PMI rose to a three-year high of 50.7, crossing the 50.0 threshold that differentiates between growth and contraction.

This upturn was highlighted by strong factory output growth, reaching its peak since March 2022. Additionally, new orders surged at the fastest rate in nearly three and a half years, suggesting optimism for sustained recovery. However, while domestic orders strengthened, demand from abroad continued to decline. Analysts, like Hamburg Commercial Bank's chief economist Cyrus de la Rubia, view these developments positively, noting the resilience found in bolstering domestic demand.

Despite some ongoing challenges, including U.S. tariffs, optimism within the eurozone manufacturing sector remains. Among the countries leading this growth were Greece and Spain, with PMIs surpassing 54, while Germany's manufacturing hit a 38-month high. Yet, European economic sentiment has faltered slightly, although manufacturing prices reduced in the face of rising input costs. The European Central Bank has maintained its key rate, likely holding off any cuts until autumn.