The Eurozone Composite Purchasing Managers Index (PMI) fell to 51.9 in June from 54.8 in May, the worst reading since February 2021. However, the index remained above the no-change threshold of 50, signaling another improvement in business conditions.
The decline in June was driven by a contraction in manufacturing output for the first time in two years and a marked slowdown in activity in the services sector. Moreover, new orders stalled for the first time since March 2021. The reasons for the deterioration were inflation, the war in Ukraine, disruptions related to the pandemic, and tightening financial conditions. Meanwhile, hiring rates were the lowest in more than a year, while business expectations eased significantly amid a bleaker economic outlook. In terms of prices, inflation in input costs and product prices declined in the service and manufacturing sectors, but accelerated in the tertiary sector.
Commenting on the release, Bert Colein, senior economist at ING, said:
“PMI leaves no doubt that the economy is noticeably slowing down. Manufacturing, in particular, is performing poorly due to supply chain problems and falling demand. […] Weaker demand for resources will affect producer prices going forward, but inflationary pressures are unlikely to ease now. […] The problem remains that the overall inflation outlook is still heavily dependent on energy, and the slowdown in gas supplies is likely to be the dominant factor in at least the short-term inflation outlook.”
FocusEconomics Consensus Forecast experts expect fixed investment to grow by 3.6% in 2022, which is unchanged from last month’s forecast. In 2023, experts predict an increase in investment in fixed assets by 3.1%.