Investing.com – According to the flash PMI estimate, the Eurozone economy suffered a setback in June. For the first time in four months, the volume of new orders fell, causing a slowdown in growth in economic activity and employment. At the same time, confidence fell to its lowest level since February while the rate of inflation of purchasing costs and selling prices fell to their lowest levels in six and eight months respectively.
The slowdown in the expansion of activity in June signals a weakening of growth in the tertiary sector and a more pronounced decline in manufacturing production, with the latter marking the biggest drop in a year. Looking at the Eurozone from a geographic perspective, Germany recorded a slight increase in activity in June, while the rest of the Eurozone continued to indicate strong expansion but at a rate slowed to its lowest level in four months. France, reporting its second consecutive monthly contraction, recorded a less positive result.
In detail, the composite PMI for production in the Eurozone fell to 50.8 in June from 52.2 in the previous month, reaching its lowest value in 3 months. The data is particularly disappointing given that analysts had expected the index to rise to 52.5.
The result is the synthesis of the decline in the PMI index of tertiary activities, which this month retreated to 52.6 from 53.2 in May (53.5 the consensus) and the decline in manufacturing production: 46.0 in June from 49.3 the month before. At the same time, the manufacturing PMI index fell to its lowest level in 6 months, reaching 45.6, while the markets estimated a growth result of 48.0.
Expectations were for an increase and instead…
“But is the manufacturing recovery over before it even began?” asks Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commenting on the data of the HCOB PMI index.
“Both we and the markets had anticipated that after the increase in the index in May, we would see another increase in June, which could potentially set the stage for an upward trend. Having said that – continues de la Rubia -, rather than approaching growth, the Eurozone Flash Manufacturing PMI HCOB has fallen, destroying any hope of recovery. This halt was exacerbated by the fact that new orders, which usually serve as a perfect indicator of short-term activity, declined at a far faster rate than in May.” In short, according to the expert, this rapid decline in the flow of orders suggests a recovery that is more distant than initially expected.
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