NewsEurozone manufacturing slump: Lowest PMI in two months signals crisis

Eurozone manufacturing slump: Lowest PMI in two months signals crisis

There is new data from European economies
There is new data from European economies
Images source: © Getty Images | Bloomberg
Robert Kędzierski

1 July 2024 20:49

The PMI index for the eurozone manufacturing sector fell in June to 45.8 points from 47.3 in May, indicating the fastest rate of economic decline since April. S&P explains that the poor data is due to decreases in production, orders, and employment. However, that's not all.

The latest PMI survey by S&P Global points to a worsening crisis in the eurozone's manufacturing sector. The report, published on Monday, shows that the PMI index for manufacturing fell in June to 45.8 points from 47.3 in May. Large economies, including Germany, also recorded a decline. This is the lowest reading in two months, significantly below the 50-point threshold that separates economic growth from contraction and the long-term average of 51.6 points.

PMI for the entire Eurozone down

The main reason for the worsening situation was the accelerated decline in production. The production index fell to 46.1 points from 49.3 in May, marking the lowest level in six months.

The economic downturn coincided with a significant weakening in demand, as evidenced by the decline in the new orders index. Export orders fell for the twenty-eighth consecutive month, and this decline was the fastest since February, according to the S&P report.

Weaker demand prompted producers to cut back on purchasing activity. The purchase decline was more pronounced than in May and faster than the simultaneous production and new orders declines.

For the first time in 16 months, there was an increase in production costs. This trend is visible, for example, in data from Germany.

Only three countries in the Eurozone with growth

Only three eurozone countries recorded growth in the manufacturing sector in June: Greece (54.0 points), Spain (52.3 points), and the Netherlands (50.7 points). The other monitored economies experienced a deterioration in industrial conditions. Germany once again found itself at the bottom of the PMI ranking, a position it has held since February—emphasises S&P.

What are the reasons for the problems in European industry?

The June data sends another troubling signal from European industry. In the interview, Ana Boata, Chief Economist at Allianz Trade, explains the chances of its recovery.

High energy prices and an ageing population strip Europe of its competitiveness. Investment in new technologies, including artificial intelligence, could remedy these issues. She stated that this should not be skimped on, even if governments already face excessive deficits today.

See also