Eurozone business activity growth slows sharply


Published: 2024-06-21 17:23

Last Updated: 2024-07-13 09:04


Growth in business activity in the eurozone slowed in June, with the manufacturing sector experiencing its largest decline in six months, according to a survey released on Friday.

The Purchasing Managers' Index (PMI) for the eurozone, published by S&P Global and compiled by Hamburg Commercial Bank, dropped to 50.8 points from 52.2 points in May, marking a three-month low.

A PMI reading above 50 indicates growth, while below 50 signifies contraction, as reported by Agence France-Presse.

Manufacturing activity fell to 46 points in June from 49.3 in the previous month.

Despite this, the data "indicated that GDP will continue to grow in the second quarter," according to S&P. However, the drop in the PMI suggested that growth "might be slower than initially expected," said Bert Colijn, chief eurozone economist at ING Bank.

Economists noted that the European Central Bank (ECB) is unlikely to lower interest rates again in July, though more cuts are anticipated later in the year.

Hamburg Commercial Bank's chief economist Cyrus de la Rubia stated, "The PMI does not encourage the ECB to cut interest rates in July."

France, the eurozone's second-largest economy, significantly impacts the euro area's economic performance, according to de la Rubia.

"The weak economic performance in France has clearly contributed to the deteriorating economic conditions in the eurozone," de la Rubia said.

The study showed a decline in both the services and manufacturing sectors.

De la Rubia suggested this could be linked to President Emmanuel Macron's party's defeat to the far-right in the European elections this month and his call for early elections on June 30.

"This unexpected turn of events likely caused significant uncertainty about future economic policies, leading many companies to delay investments and new orders," de la Rubia added.

However, Capital Economics' chief Europe economist Franziska Palmas cautioned against "overinterpreting" these developments, noting that "the French PMI began to fall in May before the political upheaval."

In contrast, Germany, the eurozone's largest economy, recorded an increase in business activity for the third consecutive month, according to the survey.