Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, has offered a more optimistic perspective on Eurozone manufacturing PMI data.
While the overall PMI has declined to 43.5, indicating a noticeable softening in the industry, de la Rubia points out that all 12 sub-indexes have either increased or remained largely stable. This suggests that the downward trend of the past few months is starting to lose steam.
Even amid a significant drop in output over the past five months, companies appear reluctant to engage in large-scale layoffs. This may not bode well for productivity or per capita output, but it provides a degree of stability to the overall economy since people are not losing their incomes.
One of the factors contributing to the slump is destocking, as companies have been reducing their inventory levels. However, there are preliminary signs that this process is nearing its end, as businesses have slowed down their inventory reductions in August.