Eurozone manufacturing sector slump continues in July

LONDON (ICIS)–The Eurozone manufacturing sector remained in deep contraction in July, with a steep decline in new orders leading to further contractions in output, and producers unable to pass on higher costs to customers

The purchasing mangers’ index (PMI) for the sector stood at 45.8 in July, unchanged from June, while input prices saw the fastest increase in a year and a half, according to data from S&P Global.

New orders are shrinking at the fastest rate in three months, while job shedding has continued for four months, with workforce reductions accelerating to the fastest pace since last December.

A PMI above 50.0 indicates growth, while below 50 signals contraction. Hopes for overcoming the production slump have faded, prompting Hamburg Commercial Bank chief economist Cyrus de la Rubia to suggest a likely reduction in the GDP growth forecast from 0.8%.

Greece and Spain, previously strong performers, saw growth slow to seven- and six-month lows of 53.2 and 51.0, respectively. Ireland’s manufacturing sector remained broadly in growth territory, at 50.1, while the Netherlands, Italy, France, Germany and Austria were all in contraction territory .

However, purchasing activity trimmed more gently in July compared to June, and supplier performance improved.

Factory goods prices remain stable, suggesting firms are absorbing costs. This, along with weakening demand, is expected to shrink profit margins and investments, potentially keeping inflationary pressures in check.

The manufacturing sector faces challenging months ahead with no signs of improvement.