Euro Area: Manufacturing PMI remains downbeat in July
The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI) remained unchanged from the previous month at 45.8 in July. As a result, the index remained below the 50.0 no-change threshold, signaling a sustained deterioration in manufacturing-sector operating conditions compared to the previous month.
The contraction in the Eurozone’s manufacturing sector was primarily driven by a steeper reduction in new orders, which led to accelerated contractions in output and employment. This downturn in factory orders, ongoing since May 2022, intensified in July, marking the quickest pace of contraction in three months. Weaker cross-border sales activity also contributed to the decline in demand for Eurozone goods, as evidenced by a solid reduction in new orders from export markets. To manage lower workloads, manufacturers increasingly relied on their backlogs, leading to a sharp and quicker depletion of outstanding business volumes, which in turn resulted in the most marked contraction in production levels seen year-to-date.
July’s data also highlighted a marked acceleration in cost pressures, with input prices increasing at the fastest rate in a year and a half. Despite these rising costs, Eurozone factories refrained from passing on their increased cost burden to clients, as charges for goods leaving the factory gate remained broadly unchanged from June. This reflects a cautious stance among manufacturers amid weakening business confidence, which dropped to a four-month low.