The fall in euro zone manufacturing was not as bad as initially feared in June, with earlier forecasts revised upwards on Monday, but the region's overall contraction remains persistent.
According to a monthly manufacturing survey by S&P Global and the Hamburg Commercial Bank (HCOB), the Purchasing Managers' Index (PMI) rose to 45.8 last month, up 0.3 percentage points from the initial reading of 45.6 released two weeks ago.
Notably, manufacturing PMIs for Germany, France and Italy were all revised slightly upwards this month.
Still, the single currency area's headline reading has fallen from a 14-month high of 47.3 in May and remains well below the 50-point dividing line between expansion and recession. The long-term survey average is at 51.6.
Factory production across the euro area contracted at its fastest pace so far in 2024, with the production PMI falling to 46.1 from 49.3 amid a sharp deterioration in demand conditions, and the new orders sub-index also falling further below the 50-point level.
Meanwhile, manufacturers reduced purchases in June due to reduced production requirements, and purchased inventories continued to decline, according to the HCOB.
“Is this another bull trap for manufacturing, similar to the false starts in early 2023 when production improved temporarily only to then fall back for a long period? In fact, PMI indices for all euro area countries except Italy worsened in June,” said HCOB chief economist Cyrus de la Rubia.
“However, we see this as temporary rather than a sign of a longer-term economic downturn. Manufacturing growth was also seen in other parts of the world in June, according to flash national PMIs, including from the US, UK and India. This global recovery provides a favourable backdrop for euro area manufacturers. Moreover, optimism for future production remains as high as it was in May, suggesting that businesses still feel confident about next year.”
