Eurozone Manufacturing Activity Shrinks In July
Adding to recession risks, the euro area manufacturing sector
contracted in July as production logged the sharpest fall since the
initial wave of the COVID-19 lockdowns in early 2020, final data
from S&P Global showed on Monday.
The final manufacturing Purchasing Managers' Index fell to a
25-month low of 49.8 in July from 52.1 in June. The flash reading
A score below 50.0 indicates contraction. The reading signaled
the first deterioration in manufacturing conditions for just over
two years. Manufacturing output declined at the sharpest since the
early stages of the pandemic in May 2020. Another major drag on
output was demand, with new orders falling sharply.
The survey showed that there was a stronger stockpiling at the
start of the third quarter, with both pre- and post-production
inventory levels rising at faster rates.
Purchasing activity was subsequently reduced, marking the first
fall in input buying in just under two years. At the same time,
delivery times lengthened to the least marked extent since October
Employment increased at the softest pace in almost a
year-and-a-half in July.
Manufacturers turned pessimistic in their assessment towards
growth prospects over the coming year. High inflation, the war in
Ukraine, future energy supplies and recession fears were cited by
firms as reasons for the negative outlook. Eurozone manufacturing
is sinking into an increasingly steep downturn, adding to the
region's recession risk, Chris Williamson, chief business economist
at S&P Global Market Intelligence said.
The energy crisis adds to the risks that not only will weaker
demand and destocking cause manufacturing production to decline at
an increased rate in the coming months, but reduced energy supply
will act as an additional drag on the sector, Williamson added.
Germany, France, Italy and Spain all recorded sub-50.0 readings
in their respective headline manufacturing PMIs in July.
Germany S&P Global/BME final manufacturing PMI registered
49.3 in July, down from 52.0 a month ago but slightly above the
flash 49.2. The sector shrank for the first time since June 2020.
The principal drag on the performance came from a deep fall in new
At the same time, the French manufacturing sector downturn
worsened in July as both output and new orders declined at their
greatest extents since the initial wave of COVID-19 disruption took
place in the first half of 2020. The final factory PMI dipped to
49.5 from 51.4 in June. The flash reading was 49.6.
Italy's manufacturing activity also fell into the contraction
territory for the first time since June 2020. The PMI slid to 48.5
in July from 50.9 in June. There were renewed decline in production
as well as orders.
The contraction in Spain's factory sector was the first in more
than a year. The index posted 48.7, down from 52.6 in June and hit
its lowest level since May 2020.
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