This is exactly what Mario Draghi was saying. Eurozone production fell again in July, meaning the downward trend in production that began in September 2022 continues. Draghi presented a 400-page plan to improve European competitiveness, including a comprehensive industrial strategy. Today's weak production data is a good indication of the concerns.
Production of capital goods, intermediate goods and durable consumer goods declined, while production of non-durable goods and energy increased. The current weakness is increasingly linked to a lack of demand. New orders remain weak. This applies to both domestic and export orders. But at the same time, input costs remain high due to factors such as rising labor costs and rising transport costs due to the unrest in the Middle East.
The coming months show no signs of improvement. Manufacturing survey data remains weak and points to a further contraction. This means that the euro area economy remains reliant on service sector growth to sustain the GDP growth recovery. The first two quarters of the year were better than expected, but the upturn may have been short-lived. Weak manufacturing performance could cap euro area GDP growth at 0.3% for the time being.
