Eurozone manufacturing output remains weak in June

LONDON (ICIS)–Economic growth in the Eurozone has remained subdued, reaching a seven-month high despite the declining output from manufacturers, analysts at IHS Markit said on Friday.

The flash eurozone composite purchasing managers’ index (PMI) rose to 52.1 in June, rising for the second consecutive month up from 51.8 in May and the highest point since November.

Any growth was tempered by poor performance in the manufacturing sector. The manufacturing PMI ticked up month on month to 47.8 – still indicating contraction – and the manufacturing PMI outlook index hit a two-month low dropping to 48.8.

PMI numbers above 50.0 indicate expansion.

Manufacturing suffered the sharpest overall decline decline in six years for the quarter, with backlogs of work continuing to fall sharply and decreases recorded for new goods orders and exports.

Market sentiment anticipates limited growth in the coming months on the back of continued geopolitical tensions and steeper competition, with manufacturers highlighting the slowing demand in export markets, trade wars and falling raw material costs as particular concerns.

The Eurozone composite PMI was largely supported by growth in the services sector, which recorded the strongest quarter since the third quarter of 2018, and saw increases in new business orders and strong employment growth.

These trends were reflected in the German PMI readings, with strength from the services sector offsetting a weak performance from the manufacturing.

The flash German manufacturing PMI reading edged up to a four-month high at 45.4, but continued to contract.

Production fell for the fifth month running in June which was attributed to the weakness in the automotive industry, and manufacturers cut staff for the fourth month in a row, although to a lesser extent than the previous month.

France bucked the trend, as the manufacturing PMI rose to 52.0 from 50.6 on the back of good demand.

“Manufacturing… remains in a steep downturn which is only showing tentative signs of moderating…Concerns about weaker economic growth at home and in export markets, rising geopolitical risks and trade wars continue to dominate the picture and dampen business spending, investment and sentiment.” said Markit chief business economist Chris Williamson.

However, the overall rate of expansion remains weak, with the survey data indicative of eurozone growth of just over 0.2% in the second quarter,” he added.

Picture source: Nyein Chan Naing/EPA-EFE/Shutterstock