Eurozone manufacturing health, as measured by the HCOB Manufacturing Purchasing Managers’ Index (PMI) and compiled by S&P Global, declined for the fourth time in five months in June 2024. The PMI fell from May’s 14-month high of 47.3 to 45.8, indicating a solid and accelerated deterioration in the sector. This renewed decline means the PMI remains significantly below its survey average of 51.6.

Weaker trends were seen across the majority of manufacturing sectors at the national level during June. Greece retained its position at the top of the Manufacturing PMI rankings, despite the index here falling to a six-month low. Slower rates of improvement were likewise recorded for both Spain and the Netherlands. The remaining monitored euro area constituents saw factory conditions worsen at the end of the second quarter. Except for Italy, deteriorations were stronger than in May. Germany’s manufacturing sector was once again the eurozone’s worst-performing, as has been the case in every month since February.

After nearly stabilising in May, the final month of the second quarter saw factory production across the euro area fall solidly and at the fastest pace in 2024 so far. June’s contraction in output came amid a sharper deterioration in demand conditions, as evidenced by the respective index for new orders falling further below the 50 no-change mark. Eurozone goods producers also reported weaker sales to clients externally, with the latest survey data signalling a twenty-eighth consecutive monthly drop in new export orders. The reduction was marked and the steepest since February, as per S&P Global.

Eurozone manufacturers lowered purchasing quantities in June amid shrinking production requirements. In fact, the decrease in buying levels was more pronounced than in May and quicker than the concurrent declines witnessed in both output and new orders. Stocks of purchases continued to be depleted, as has been the case in each month since early-2023. June’s decline was the sharpest in the year-to-date.

Factory output was partially supported by the completion of backlogged work. Outstanding business fell in June, extending the current sequence of depletion to just over two years. The latest survey data implied an uptick in spare capacity at euro area manufacturers, leading employment to subsequently be reduced for a thirteenth straight month. The rate at which factory jobs were cut was the fastest in three months.

As has generally been the case for the best part of a year-and-a-half (and excluding January this year, which was the height of the Red Sea disruptions), eurozone manufacturers reported a shortening of suppliers’ delivery times in June. That said, the extent to which vendor performance improved was the weakest since February.

Meanwhile, input costs at euro area factories increased for the first time in 16 months during June. The price of goods leaving the factory gate continued to fall, although the rate at which charges were discounted was only marginal and the softest seen across the current 14-month sequence of deflation, S&P Global added.

Lastly, despite the broader deterioration in business conditions at the end of the second quarter, business confidence was unchanged from May 27-month high. This meant that firms were optimistic towards the forthcoming year, with the level of positive sentiment above its long-term average.

Fibre2Fashion News Desk (DP)