Eurozone’s Purchasing Managers’ Index (PMI) data for the month of June has raised concerns as both the Manufacturing and Services sectors experienced significant declines. The Manufacturing PMI dropped from 47.3 to 45.6, falling below the expected 45.6. Similarly, the Services PMI decreased from 53.2 to 52.6, missing the forecast of 53.5. Consequently, the Composite PMI, which combines both sectors, decreased from 52.2 to 48.0.
According to Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, the preliminary HCOB Flash Eurozone Composite Output Index suggests a slight downgrade in GDP growth for the second quarter. Despite this, the data still indicates positive growth of 0.2% compared to the first quarter. He also mentioned that the European Central Bank’s (ECB) decision to cut rates in June may have been influenced by easing price pressures in the service sector. However, based on the PMI data, it is unlikely that there will be another rate cut in July.
In Germany, there was an increase in prices by service providers compared to May. Additionally, the manufacturing sector, which had been experiencing deflation in output charges for the past 14 months, saw input prices rise in June for the first time since February 2023. These changes in pricing dynamics indicate a shifting economic landscape within the Eurozone.
The recent decline in both the services and manufacturing sectors in France could be attributed to the outcome of the European Parliament elections and President Macron’s announcement of snap elections on June 30. The resulting uncertainty has caused many companies to hold back on new investments and orders, contributing to the overall economic downturn in the Eurozone.
Specifically, German PMI Manufacturing fell from 45.4 to 43.4, while PMI Services decreased from 54.2 to 53.5. The Composite PMI for Germany also fell from 52.4 to 50.6. In France, PMI Manufacturing dropped from 46.4 to 45.3, PMI Services decreased from 49.3 to 48.8, and the Composite PMI fell from 48.9 to 48.2.
The latest Eurozone PMI data highlights the challenges faced by the region’s economy and the potential impact of political events on business activities. As policymakers and market participants analyze these figures, it will be crucial to monitor how different countries within the Eurozone respond to these economic developments in the coming months.