Eurozone crisis deepens: June PMI hits record low
The PMI index for the eurozone industry fell to 45.8 points in June from 47.3 in May, signaling the fastest downturn rate since April. S&P explains that the poor data is due to production, orders, and employment declines. But not only that.
3:03 PM EDT, July 1, 2024
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 PMI index for the industry fell to 45.8 points in June from 47.3 in May. Major economies, including Germany, also recorded a decline. This is the lowest reading in two months, significantly below the 50-point threshold separating growth from contraction in economic activity and the long-term average of 51.6 points.
PMI for the entire eurozone down
The main reason for the deterioration was an accelerated decline in production. The production index fell to 46.1 points from 49.3 in May, the lowest level in six months.
The economic downturn coincided with a noticeable weakening of demand, as evidenced by the decline in the new orders index. Export orders fell for the twenty-eighth month in a row, and the rate of this decline was the fastest since February, according to the S&P report.
Weaker demand prompted producers to reduce their 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, production costs increased. This trend is visible, among other places, in the data from Germany.
Only three countries in the eurozone 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). The remaining monitored economies experienced a deterioration in industrial conditions. Germany again ranked at the bottom of the PMI ranking, as has been observed continuously 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. Ana Boata, Chief Economist at Allianz Trade, talks about the chances of its recovery in the interview.
"Expensive energy and an aging population are depriving Europe of competitiveness. Investments in new technologies, including artificial intelligence, can remedy these problems. This should not be economized on, even if governments already have excessive deficits today," she said.
The expert also emphasized that Central and Eastern Europe can still attract foreign investments.
