European Manufacturing PMI in Contraction as it Declines for Sixth Consecutive Month in July

European countries manufacturing sector fell into contraction for July according to the latest S&P Global PMI™ data with missing expectations. The eurozone saw output decline again. The euro area and the UK were some of the larger manufacturing economies to see new business decline. Business optimism in most areas dipped to a two-year low, inflationary pressure remained elevated and supply chains also stayed stretched.

The S&P Global Eurozone Manufacturing flash PMI® fell to 49.6 (expected 51.0; last 52.1) 25-month low. and flash Services PMI 50.6 (expected 52.0; last 53.0), 15-month low and a sixth consecutive month of decline in the headline measure. In the UK output growth slows to near-stagnation pace as new order intakes fall for the first time since January 2021.

Europe Manufacturing Map

Europe and UK Manufacturing PMI July 2022 

  • Eurozone’s Flash July Manufacturing PMI 49.6 (expected 51.0; last 52.1) 25-month low.
  • Eurozone Flash July Manufacturing Output Index at 46.1 (Jun: 49.3). 26-month low.
  • Eurozone Flash July Services PMI 50.6 (expected 52.0; last 53.0) 15-month low.
  • Flash Eurozone PMI Composite Output Index at 49.4 (Jun: 52.0). 17-month low.
  • Germany’s flash July Manufacturing PMI 49.2 (expected 50.6; last 52.0) and flash Services PMI 49.2 (expected 51.2; last 52.4)
  • U.K.’s flash July Manufacturing PMI 52.2 (expected 52.0; last 52.8) and flash Services PMI 53.3 (expected 53.0; last 54.3).
  • France’s flash July Manufacturing PMI 49.6 (expected 50.8; last 51.4) and flash Services PMI 52.1 (expected 52.7; last 53.9)

Comments on Europe

Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“The eurozone economy looks set to contract in the third quarter as business activity slipped into decline in July and forward-looking indicators hint at worse to come in the months ahead.

“Excluding pandemic lockdown months, July’s contraction is the first signalled by the PMI since June 2013, indicative of the economy contracting at a 0.1% quarterly rate. Although only modest at present, a steep loss of new orders, falling backlogs of work and gloomier business expectations all point to the rate of decline gathering further momentum as the summer progresses.

“Of greatest concern is the plight of manufacturing, where producers are reporting that weaker than expected sales have led to an unprecedented rise in unsold stock. Production will likely need to be reduced as companies adapt to this weaker demand environment, in turn widely linked to rising prices

“In services, the boost to demand from the reopening of the economy has faded and growth is now at a near standstill, with customers often deterred by the increased cost of living and concerns about the outlook.

“Business expectations for the year ahead have meanwhile fallen to a level rarely seen over the past
decade as concerns grow about the economic outlook, fuelled in part by rising worries over energy supply and inflation but also reflecting tighter financial conditions.

“With the ECB raising interest rates at a time when the demand environment is one that would normally see policy being loosened, higher borrowing costs will inevitably add to recession risks.

“One ray of light was a further marked cooling of inflationary pressures from the survey gauges of both
input costs and selling prices, which should feed through to lower consumer price inflation. However, at present, these inflation gauges remain higher than at any time prior to the pandemic, underscoring the unenviable challenge facing policymakers of taming inflation while avoiding a hard landing for the economy.”

About the Report

The Global Report on Manufacturing is compiled by IHS Markit based on the results of surveys covering over 13,500 purchasing executives in over 40 countries. Together these countries account for an estimated 98% of global manufacturing output2 . Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease.

Source: IHS Markit Procure

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