Eurozone manufacturing hit by steepest decline in two months
The PMI index for the eurozone industry fell to 45.8 points in June from 47.3 in May, indicating the fastest pace of deterioration since April. S&P explains that the poor data is due to production, orders, and employment declines. But that is not all.
The latest PMI survey conducted by S&P Global indicates a deepening crisis in the eurozone manufacturing sector. The report, published on Monday, shows that the manufacturing PMI index fell to 45.8 points in June from 47.3 in May. Large economies, including Germany, also recorded a decline. This is the lowest reading in two months, significantly below the threshold of 50 points that separates growth from contraction in economic activity and the long-term average of 51.6 points.
PMI for the entire eurozone declines
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, representing the lowest level in six months.
The downturn coincided with a marked weakening in demand, as evidenced by the decline in the new orders index. According to the S&P report, export orders fell for the twenty-eighth consecutive month, and this decline was the fastest since February.
Weaker demand prompted producers to reduce their purchasing activity. The purchase decline was more pronounced than in May and faster than the simultaneous declines in production and new orders.
For the first time in 16 months, an increase in production costs was recorded. This trend is evident, among other things, in the data from Germany.
Only three eurozone countries with growth
In June, only three eurozone countries recorded growth in the manufacturing sector: Greece (54.0 points), Spain (52.3 points), and the Netherlands (50.7 points). Other monitored economies experienced a deterioration in industrial conditions. Germany once again found itself at the bottom of the PMI ranking, which has been observed consistently since February, S&P emphasizes.
What are the reasons for the problems of European industry?
The June data is another bad signal sent by European industry. In an interview, Ana Boata, Chief Economist at Allianz Trade, talked about the chances of its revival during their conversation.
"High energy costs and an aging population are depriving Europe of competitiveness. The remedy for these ailments could be investments in new technologies, including artificial intelligence. This should not be skimped on, even if governments already have excessive deficits today," she stated.
The expert also emphasized that Central and Eastern Europe can still attract foreign investments.
