The latest data on manufacturing activity in Europe showed a still weak recovery. Are there signs of a possible recession? How to read the data according to the expert.
Europe’s recovery continues to show mixed signs.
Manufacturing activity in the region worsened last month, with demand falling at a much faster pace even as factories cut prices, a survey found.
The final HCOB Eurozone manufacturing PMI index, compiled by S&P Global, fell to 45.8 in June from 47.3 in May, just above a preliminary estimate of 45.6. It has been below the 50 mark that separates growth from contraction for two years now.
The reading also remained below the survey average of 51.6, with output contracting at the fastest pace so far this year. Analysts are now wondering whether the recession has truly been averted or could still hit the region.
The Eurozone is reeling and still fears recession
Although slightly higher than estimates, the manufacturing PMI was still disappointing for the eurozone. Additionally, new orders, purchasing activity and employment all fell faster.
On the pricing front, production costs increased for the first time since February 2023, leading factories to reduce discounts. Sales rates saw a slight decline, the slowest rate in more than a year. Finally, the outlook for production over the next 12 months is positive.
“It’s quite depressing that new orders are declining at an accelerating pace. This drop comes after a record period of 25 consecutive months of falling demand, but there was a vague hope that things would improve in May, when the respective index showed some increase”, said Cyrus de la Rubia, economist head at Hamburg Commercial Bank.
Is recession a risk? According to the expert, not really. PMI indices for all eurozone countries except Italy worsened in June. However, we are inclined to view this as more of a temporary event than a sign of a prolonged recession, he said.
Italy reported a manufacturing PMI of 45.4, higher than the estimate and the previous result. The other two large European economies France and Germany, in comparison, showed manufacturing activity slightly above forecasts, but lower than previous data.
Darker clouds gather on the horizon for Europe. The still weak data from the industrial sector adds to the political turbulence of the old continent and the uncertainty about the path of inflation.
Original article published on Money.it Italy 2024-07-01 12:53:17. Original title: Brutte notizie per l’Europa. Torna il rischio recessione
