According to S&P Global Market Intelligence PMI, Europe's industrial sector continues to struggle to pull itself out of trouble. The Eurozone PMI index in March was slightly lower than in February. In the last month of the first quarter, it was 46.1 points, down 0.4 points from February.
This decline was mainly driven by the two least important sub-indices. First, the waiting time for delivery has decreased significantly (which is a negative, as it indicates weak demand) and purchase levels have decreased.
One bright spot is the fact that production and new order levels have fallen at their slowest pace in months. For production starting in April 2023, the rate of decline in new orders has slowed for five months. As far as export sales are concerned, this was the lowest level in almost two years for the euro area countries as a whole.
Nevertheless, it has been exactly 12 months since production levels in the euro area started trending downward. The reduction in purchases continued the trend of reducing inventories of means of production accumulated during the pandemic. These were his 14th consecutive month of declines. The prices of both the means of production and the final product fell. However, the latter is much more powerful as companies try to compete on price in a market with low demand.
While the North is weakening, the South is growing.
The green light for euro zone industry is Greece, which was once the EU's top candidate due to its economic situation. With her score of 56.9 points, the country clearly exceeds the neutral barrier of 50 points between increase and decline in industrial activity. In general, southern Europe is faring very well during the current economic slowdown. Spain and Italy were the first teams to score over 50 points in a year.
The Netherlands and Ireland could also enter the growth zone in the coming months. The PMI index for these countries was 49.7 points and 49.6 points, respectively. For the Netherlands, this was the best result in 19 months. For many countries, the economic slowdown is over.
Despite other countries recording increases in industrial activity or moving closer to expansion territory, the euro area's overall results are far from those of its national leaders. The economy is being held back by Europe's two most powerful countries, France and Germany. The former boasts an average performance (46.2 points), while Germany's performance is significantly lower (41.9 points).
wait for economic recovery
“Over the past eight months, manufacturing has gradually climbed the PMI ladder. However, it is still at the top of the stairs leading from underground to above ground. But mainly due to the poor situation in industry in Germany and France , the transition to a higher level is not possible,” concludes Dr. Cyrus de la Rubia.
Sentiment about the future of the eurozone has reached its highest level in almost a year (since April 2023). However, historically they are still quite low. Dr. Della Rubia argues that the eurozone's manufacturing recession will continue.
As he highlights, Germany, France, Italy and Spain together make up three-quarters of eurozone industry. Of the four “cylinders” Dr. Della Rubia calls, the two most powerful are not working. Moreover, experts are very concerned about the continued decline in new orders, which is now approaching the longest period of decline on record for this indicator. Dr. Della Rubia says this will make it impossible for industrial activity to recover.
broken “cylinder”
The EU's largest economy remains in a negative mood. The German industrial PMI index in March was 41.9 points, down from 42.5 points in February. The latest reading was the lowest level in five months. This was the second consecutive month of decline. Hopes for an economic recovery in 2024 have so far been dashed. Moreover, the index reading is not only still significantly below the neutral level of 50 points, but also clearly below the 44-point mark, which implies a contraction in industrial production.
“Germany's manufacturing sector has been in recession since around the middle of last year, and the latest PMI figures suggest a further contraction in the sector in the first quarter of 2024. To make matters worse, the economic slowdown It is very widespread and has also affected capital goods “as intermediate goods and consumer goods,'' said Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
The rate of decline in new orders and production has slowed again, which is a positive sign, but the fact remains that there is still no growth in these categories. Export sales continued to decline, but at the slowest pace in 11 months.
The decline in the main index was mainly accelerated by a decline in employment (the poor situation in the industry has already led to layoffs), weakening corporate purchasing activity and improvements in on-time delivery. This last factor cannot be considered completely beneficial, as it is mainly due to the low demand for imported raw materials or means of production.
However, the forecasts of German manufacturing industry representatives are more optimistic than in previous months. They are mainly counting on an improvement in demand, especially in the second half of the year. Although far from ideal, the atmosphere in Poland is different. However, when compared to Germany, it looks very positive.
“The difference between Polish and German PMIs is the widest since mid-2012 and one of the largest in history,” emphasizes Trevor Balchin, economics director at S&P Global Market Intelligence.
