Confidence in the eurozone's troubled manufacturing hit its highest level in 34 months despite a slowing in output, according to a survey published on Tuesday.

The HCOB manufacturing purchasing managers index hit 49.5 in June, up from May's 49.4 p - the highest level since February 2022, although still below the 50 mark which separates expansion from contraction.

Meanwhile the output Index fell to 50.8 from 51.5, a three-month low.

"June data highlighted a sustained expansion of output levels across the euro area manufacturing sector, although there was a slight loss of momentum since May. Encouragingly, total new work stabilised during the latest survey period, thereby ending a 37-month period of decline," HCOB said.

HBOC chief economist Cyrus de la Rubia said there were "signs of some stabilisation" in the manufacturing sector.

"Companies have now expanded production slightly for the fourth month in a row, order intake has ceased to fall, and slightly longer delivery times also indicate that demand is picking up a bit. Against the backdrop of numerous uncertainties - US tariffs, the crisis in the Middle East, and Russia's ongoing war against Ukraine - this can certainly be seen as a sign of resilience."

"However, it also has to do with the fact that, after years of recession, the economic cycle usually turns at some point because old machines need to be replaced, cars can no longer be repaired, and the necessary modernization of factory buildings can’t be postponed any further."

“Encouragingly, four of the eight eurozone countries where the PMI survey is conducted are now in expansion territory. Germany is not one of them, but the situation here has nevertheless improved somewhat. However, France, Italy, and Austria are putting the brakes on the eurozone’s growth, as their downturn has recently deepened."

"If Germany enters the growth zone, which we believe is likely given the new government's growth package, among other things, these countries could receive a positive boost, as Germany is their most important export destination."