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Eurozone factory decline deepened in June

In June, the eurozone’s factory decline got worse. According to a poll that portrayed an increasingly bleak picture for the industry, industrial activity in the Eurozone shrank more quickly than initially estimated in June as continued policy tightening by the European Central Bank strained finances.


Surveys released earlier on Monday showed that all four of the main economies in the euro zone experienced a decline in industrial activity last month, indicating that the slump was widespread.

The COVID pandemic was firmly entrenched in the world when the final manufacturing Purchasing Managers’ Index (PMI) for HCOB dropped to 43.4 from 44.8 in May. This reading was below the preliminary reading of 43.6 and further away from the 50 threshold that separates expansion from contraction.

An output index that is used to calculate the composite PMI, which is coming on Wednesday and is seen as a reliable indicator of the state of the economy, plummeted to an eight-month low of 44.2 from 46.4.

There is mounting evidence that the ECB’s interest rate increases are having a negative impact on the capital-intensive manufacturing sector. The ECB has increased key rates by 400 basis points already in its fight to reduce high inflation to its 2% objective and is largely expected to increase them by another 25 basis points this month, which will have an adverse effect on the purchasing power of borrowers and businesses.


Despite deeper price reduction on manufactured goods, demand declined at the sharpest rate in eight months, causing less hopeful firms to reduce their personnel for the first time since early 2021. The employment index decreased from 51.5 to 49.8.

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