Exports and employment have also been sluggish, while rising input costs have further contributed to the decline in output.
advertisementAccording to S&P Global, the preliminary estimate of the HCOB Eurozone Manufacturing Purchasing Managers' Index (PMI) for June was released on Friday morning and came in at 45.6, the lowest level in six months and down significantly from 47.3 in May.
However, with the June figure still below 50, eurozone manufacturing is still believed to be in contraction, while a figure above 50 would mean growth.
June marked the 15th consecutive month of contraction, mainly due to weak figures for new orders, employment and exports, while some businesses faced further increases in input costs, causing selling prices to fall slightly.
Selling prices fell at the slowest pace in 14 months, and sentiment among manufacturers about the outlook for the coming months was also quite depressed.
The HCOB Eurozone Services PMI was also released on Friday morning, dropping to 52.6 from 53.2 in May. This was the fifth consecutive month of increase but still the lowest reading in the past three months.
In services, new business grew more rapidly, but export orders are still trending downward. Employment is also strong, and selling prices and input costs are also rising. However, selling prices rose to their lowest level in more than three years. Business confidence plummeted to its lowest level since January 2024.
The HCOB Composite PMI came in at 50.8 in June, down from 52.2 in May and well below analysts' expectations of 52.5, but still marking the fourth consecutive month of growth in private economic activity.
That was mostly due to growth in the services sector, which, while smaller this month, was enough to offset the slowdown in manufacturing. In aggregate, new orders fell for the first time in four months, mostly due to weaker export demand and companies speeding up work on their backlogs.
Total employment in the euro area's manufacturing and services sectors also grew at the slowest rate since March 2024. Input cost inflation also fell to its lowest level in 2024.
Regarding the outlook for economic growth this year, the European Commission said in its Spring 2024 Economic Forecast that “Growth in economic activity this year and next is expected to be driven mainly by a steady expansion in private consumption, with continued increases in real wages and employment supporting rising real disposable incomes. However, private consumption remains subdued by the strong propensity to save.”
“In contrast, investment growth appears to be slowing and is expected to recover only gradually, dragged down by a negative cycle in housebuilding. Credit conditions are expected to improve over the forecast period, although markets now expect a somewhat slower path of interest rate cuts compared to the winter.”
