Eurozone factory activity fell in July as recession fears mounted

Manufacturing activity across the euro zone fell last month as weak demand forced factories to stockpile unsold goods, a survey showed on Monday, adding to fears the bloc could slip into a recession.

&P Global’s final manufacturing Purchasing Managers’ Index (PMI) fell to 49.8 in July from 52.1 in June, just ahead of a provisional reading of 49.6 but below 50 for the first time since June 2020, that separates growth from contraction.

An index measuring spending, which feeds into a composite PMI due Wednesday and is considered a good indicator of economic health, fell to a more than two-year low of 46.3. In June it was 49.3.

“Eurozone manufacturing is mired in an increasingly steep downturn, adding to recession risks in the region. Orders are already falling at a pace that, barring the months of lockdown caused by the pandemic, is the strongest since the 2012 debt crisis, and it’s likely to get worse,” said Chris Williamson, chief operating officer at S&P Global .

“Lower-than-expected sales, reflected in accelerating rates of decline in new orders and exports, have led to the largest increase in unsold inventories of finished goods ever recorded by the survey.”

The new orders index fell to 42.6 from 45.2, the lowest level since May 2020 when the coronavirus pandemic began to grip the world, suggesting slim chances of a turnaround anytime soon.

S&P Global said output fell in every country surveyed except the Netherlands and that the rate of decline in Germany, France and Italy – the bloc’s three largest economies – was of particular concern.

The US economy contracted unexpectedly in the last quarter, raising the risk that the world’s largest economy was on the brink of recession.

Still, the European Central Bank hiked interest rates more than expected last month as concerns about runaway inflation trumped concerns about growth.

Inflation in the euro zone rose further from the ECB’s target of 2 percent to a record high of 8.9 percent in July, preliminary official data showed last week. While the input and output price indices fell in the PMI survey, they stayed high.

The bloc’s economy grew faster-than-expected last quarter, an initial reading showed Friday, but a July Reuters poll showed a 45 percent chance of a recession within a year. Eurozone factory activity fell in July as recession fears mounted

Fry Electronics Team

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