FX.co ★ Eurozone Manufacturing Activity Deteriorates In June

Manufacturing activity within the Eurozone experienced contraction in June, driven by accelerated declines in output, new orders, and employment, according to the latest data from the HCOB Purchasing Managers' survey compiled by S&P Global.

The Purchasing Managers' Index (PMI) for manufacturing fell to 45.8 in June, down from May’s 14-month high of 47.3. The preliminary estimate was 45.6. A PMI reading below 50 indicates contraction, and the latest results signify a marked and accelerated downturn in the manufacturing sector.

Manufacturing output contracted at the fastest rate seen in 2024 to date, exacerbated by a significant deterioration in demand conditions. Producers reported a notable decline in sales to foreign clients, with the reduction being the sharpest since February.

In response to the shrinking production requirements, manufacturers reduced their purchasing quantities more significantly than in May. Inventory levels also continued to decrease, maintaining a trend observed since early 2023.

Backlogs of unfinished work decreased in June, extending the current depletion trend to just over two years. Employment within the sector was cut for the thirteenth consecutive month. However, manufacturers reported an improvement in suppliers' delivery times during June.

Input costs rose for the first time in 16 months, while the prices for goods leaving factories continued to drop, though at a marginal pace.

Business sentiment remained stable at the same high level reported in May, reflecting a 27-month peak in optimism for the year ahead.

Among the four largest economies in the Eurozone, Germany's manufacturing sector performed the poorest. France also experienced a significant deterioration in operating conditions. Conversely, Italy’s manufacturing activity contracted at a slower rate, while Spain reported decelerated growth.

Germany faced renewed challenges in June, with accelerating contraction rates in both output and new orders following a notable easing in May. The manufacturing PMI for Germany fell to 43.5 in June from a four-month high of 45.4, slightly above a preliminary estimate of 43.4.

France saw its steepest drop in manufacturing output since January, with the final PMI at 45.4 in June, down from 46.4 in May, yet marginally above the preliminary figure of 45.3.

Italy's manufacturing sector continued to contract in June for the third consecutive month due to weakening demand conditions, nudging the PMI slightly up to 45.7 from 45.6 in May.

Spain's manufacturing sector continued to expand, albeit at a more subdued pace, with the PMI slipping to 52.3 in June from 54.0 in May.

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